M/S NEW KENILWORTH HOTELS (P) LTD.versusASHOKA INDUSTRIES LTD. AND ORS.

             MIS NEW KENILWORTH HOTELS (P) LTD.                                  A
                            v.
              ASHOKA INDUSTRIES LTD. AND ORS.

                            OCTOBER 17, 1994

         [K. RAMASWAMY AND N. VENKATACHALA, JJ.]                                 B

       State Financial Corporation Act-Section 29/Transfer of Propelty Act,
 1882-Section 61>-Scope of Right of redemption u/s 6o-Mortgage other than
a mortgage by conditional sale or an anomalous mortgag~Sale pursuant to
final decree not confirmed-Mortgagor entitled to exercise right u/s 60-No        C
question of merger of mortgage debt in decretal debt-Limited right of Finan-
cial Corporation u/s 29 to act as an owner to bring properties of defaulter to
sal~orporation not to act in derogation of right u/s 60ofT.P. Act

       The appellant filed writ petition in the High Conrt seeking for an
order to recall the judgment rendered by the High Court in another writ D
petition dated 16.9.91 and also to direct impleading of the appellant as a
party to that writ petition and to hear it aftresh in accordance with law.
That writ petition was dismissed under the inpugned order holding that
the appellant was not a necessary party to the writ petition and ·the
contesting respondent had a statutory right of redemption n/s 60 of the E
Transfer of Property Act.

       The appellant had offered bid by tenders offering to purchase the
hotel constructed by the mortgagor and taken over by the Orissa State
Financial Corporation bnt its offer had not become final by virtne of the
order of the High Court. The High Court by its order had given option to         F
the mortgagor to exercise the right of redemption n/s 60 of the T.P. Act-
In furtherance thereof the mortgagor had filed a suit and that suit was
still pending.

      This appeal had been filed against the judgment of the High Court.         G
      The appellant contended that under Settion. 29 of the State Financial
Corporation Act, while taking over the property, the Corporation shall act
in derogation of the right as a mortagee n/s 60 ofthe Transfer of Property
Act. Therefore, under the proviso to Section 60 when the Orlssa State
Financial Corporation had entered into an agreement with the appellant, H
                                    427
    428                  SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.

A it had acted in derogation of the mortgage and since the appellant bad
    already offered bis bid by tender though bis bid was not accepted pursuant
    to the order of the Court, he had an interest in the bid. It was also
    contended that the appellant was a licensee to run the Hotel as entered
    into with the Corporation and as such it was a necessary party, and
    therefore, be had a right to be heard, before the High Court, directing the
B   mortgagor to work out the right u/s 60 of the T.P. Act.

          Dismissing the appeal, this Court

           HELD 1.1. It is settled law that in the suit for redemption unless it
C   is a conditional sale or anomalous mortgage so long as the sale is not
    confirmed., the debtor has a right to deposit the entire sale money including
    the sale expenses and poundage fee and the Court is under the statutory
    duty to accept the payment and direct redemption of the mortgage. There-
    fore, it was not open lo the appellant to contend that under the proviso to
    Section 60 of the Transfer of Property Act, the Corporation has acted in
D   derogation of its right as a mortgagee but acted as an owuer u/s 29 of the
    State Finantial Corporation Act. Though u/s 29 of the Act, the Corporation
    acts as an owuer in putting the property to sale, it does not act in
    derogation of the right of the Corporation as a mortgagee and lhllt of
    mortgagor. The limited right given to the Corporation u/s 29 is to act as ·
E   an owuer to bring the properties of the defaulter to sale. The fiction of law
    u/s 29 does not have the effect of wiping out the statutory right of redemp-
    tion u/s 60 of the T.P. Act. Therefore, the right of the mortgagee still
    subsists and thereby the mortgagor is entitled to exercise the right u/s 60
    of the T.P. Act. [430-H, 431-A-C)

F         Magan/al v. Mis Jaiswal Industries & Ors., [1989) 4 SCC 344, relied
    on.

           1.2. It is only an interim arrangement made pending sale of the
    property. Therefore, the licensee does not have any right other than that
G   to be in possession as licensee pending the dispute between the mortgagor
    and the mortgagee, Accordingly, the appellant is not a necessary party to
    be heard before the order was passed by the High Court directing the
    mortgagor to excerclse the right of redemption under Section 60 of the T.P.
    Act. (431-D-E)

H         CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 7379-81
     NEW KENILWORIB HOTELS (P) LTD. v. ASH OKA INDS.LTD.                429

~~                                                                            A
     From the Judgment and Order dated 16.8.94 & 9.8.94 of the Orissa
High Court in O.J.C. No. 5392 & Misc. Case No. 5390 of 1994.

      P. Chidambaram, Harish Salve and Sunil K. Jain for the Appellant.
                                                                              B
     R.K. Jain, G.L. Sanghi, Gautam Acharya, Y. Adharyu, AP. Medh,
Pratap Sahni an<l S.B. Upadhyay for the Respondents.

      The following Order of the Court was delivered :

      Leave granted.                                                          c
      We have heard the learned counsel for the parties. We do not think
that there is any justifiable reason for interference with the order of the
High Court of Orissa. The appellant filed OJC No. 5392/94 in the High
Court seeking for an order to recall the judgment rendered by the High
Court in OJC No. 4047/89 dated 16.9.91 and also to direct impleading of D
the appellant as a party to the aforesaid writ petition and to hear it afresh
in accordance with law. That writ petition was dismissed under the im-
pugned order dated August 16, 1994 holding that the appellant is not a
necessary party to the writ petition and the contesting respondent Ashoka
Industrie; Lld. has a statutory right of redemption under s.60 of the E
Transfer of Property Act and that, therefore, the appellant cannot be heard
to contend that Ashok Industries Ltd. have no right to redemption under
s.60 of the Transfer of Property Act.

      Sri P. Chidarnbararn, learned Senior counsel for the appellant con-
tended that under s.29 of the State Financial Corporation Act, for short      F
'the Act', while taking over the property, the Corporation shall act in
derogation of the right as a mortgagee under s.60 of the T.P. Act. There-
fore, under the proviso to s.60 when the O.S.F.C. had entered into an
agreement with the appellant, it had acted in derogation of the mortgage
and, therefore, the mortgagor Mis. Ashoka Industries had no right of          G
redemption. Since the appellant had already offered his bid by tender on
November 2, 1989 though his bid was not accepted pursuant to the order
of the Court, he has an interest in the bid. It was also contended that the
appellant is a licencee to run the Hotel entered into with O.S.F.C. and as
such it is a necessary party. Therefore, he had a right to be heard, before
the High Court directing M/s Ashoka Industries Lld. by order dated            H
    430                   SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.

A   16.9.1991 to work out the right under s.60 of the T.P. Act. Thirdly, it was
    contended that this Court in Magan/al v. Mis Jaiswa/ Industries, Neemach
    & Ors., (1989] 4 SCC 344, had decided the question only under s.31 of the
    Act. It did not deal with the effect of s.29. Therefore, the ratio has no
    application. We find no force in any of the contentions. It is true that the
    appellant had offered bid by tenders on November 2, 1989 offering to
B   purchase the hotel constructed by Ashok Industries Ltd. and taken over by
    O.S.F.C. and offered a sum of Rs. 3.18 crores at the sale price. Admittedly,
    its offer had not become final by virtue of the order of the High Court.
    The High Court in the order dated 16.9.1991 had given option to Ashok
    Industries Ltd. to exercise the right of redemption under s.60 of the T.P.
C   Act. In furtherance thereof Ashoka Industries Ltd. had admittedly filed a
    suit and that suit is still pending. Since the appellant had only inchoate
    right he does not get any higher right than of a mere offerer for its
    consideration before sale is effected. As seen, there is no sale which is
    materialised. Though under s. 29 of the O.S.F.C. acts as an owner in putting
D   the property to sale, it does not act in derogation of the right of the
    O.S.F.C. as a mNtgagee and Ashok Industries as mortgagor. This Court
    has considered in Magan Lat's case the scope of the right under s.60 and
    held in paragraphs 13 and 14 thus :

             "It was further held that in a suit for redemption of a mortgage
E            other than a mortgage by conditional sale or an anomalous
             mortgage, the mortgagor has a right of redemption even after the
             sale has taken place pursuant to the final decree, but before the
             confirmation of such sale. In view of these provisions the question
             of merger of mortgage debt in the decretal debt does not arise at
             all.
F
                In this view of the matter we are of the opinion that in case the
             provisions of Order XXXIV, Rule 5 of the Code are held to l\e
             applicable to the instant case appropriate relief can be granted
             thereunder as the order of confirmation of the sale passed by the
G            High Court in favour of the first purchaser has not become ab-
             solute due to the pendency of these appeals against that order nor
             has the right of redemption of Maganlal yet extinguished."

          It is also equally settled law that in the suit for redemption unless it
H is a conditional sale or anamolous mortgage so long as the sale is not
       NEWKENILWORTII HOTELS (P) LTD. v. ASHOKAINDS. LTD.               431

 confirmed, the debtor has a right to deposit the entire sale money including A
the sale expenses and poundage fee and the court is under the statutory
duty to accept the payment and direct redemption of the mortgage. In the
light of the above law, it is not open to the appellant to contend that under
the proviso to s.60 of the T.P. Act, the Corporation has acted in derogation
of its right as a mortgagee but acted as an owner under s.29 of the Act. As B
stated earlier, the limited right given to the Corporation under s.29 is to
act as an owner to bring the properties of the defaulter to sale and not in
derogation of right under s. 60. The fiction of law under s.29 does not have
the effect of wiping out the statutory right of redemption under s.60 of the
T.P. Act. Therefore, the right of the mortgagee still sulisists and that
thereby the mortgagor is entitled to exercise the right under s. 60 of the C
T.P. Act.

       Further contention that the appellant had become a licencee and,
therefore, he has a right to be heard has no force. It is only an interim
arrangement made pending sale of the property. Therefore, the licencee
does not have any right other than that to be in possession as licencee        D
pending the dispute between the mortgagor and the mortgagee, namely,
the O.S.F.C. and Ashok Industries Ltd. Accordingly, we are of the view
that the appellant is not a necessary party to be heard before the order was
passed by the High Court on September 16, 1991 in the writ petition
directing the Ashoka Industries Ltd. to exercise the right of redemption       E
under s.60.

       The appeals are accordingly dismissed but without costs.

A.G.                                                    Appeals dismissed.