SURENDRA KUMAR LOYALKA v. ZENITH CREDIT LTD

(BY SRIYUTHS. NARASIMHAN SUMAN AND SUMAN K.S., ADVOCATES FOR R-1, SMT. NAMITHA MAHESH, AGA FOR R2 & R3.) …RESPONDENTS THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE IMPUGNED ORDER DATED 23/09/2019 IN WP NO.54236/2018 AND WP NOS.6451/2019 AND 6571/2019 (GM-ST/RN) PASSED BY THE LEARNED SINGLE JUDGE OF THIS HON'BLE COURT BY ALLOWING THIS WRIT APPEAL. THIS APPEAL, COMING ON FOR PRELIMINARY HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MRS JUSTICE ANU SIVARAMAN HON'BLE MR JUSTICE G BASAVARAJA - 3 - NC: 2024:KHC:38562-DB WA No. 464 of 2020 ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE G. BASAVARAJA)

1. This intra-court appeal is preferred under Section 4 of the Karnataka High Court Act, 1961, read with Rule 27 of the Writ Petition Rules questioning the order dated 23rd September 2019 passed by the learned Single Judge in Writ Petition No.54236 of 2018 and Writ Petitions No.6451 and 6571 of

2. Brief facts leading to this appeal are that one B.R. Loyalka and Smt. Narbada Devi Loyolka, who are the residents of Kolkata had four sons, viz. Rajkumar Loyalka, Vijay Kumar Loyalka, Vinod Kumar Loyalka and Surendra Kumar Loyalka. All of them were living together in an undivided Hindu joint family, for which B.R. Loyalka was the Karta till the date of Memorandum of Understanding/Scheme of Partition (for short "MOU/SOP") dated 30th March 2003 made between themselves. It is stated that B.R. Loyalka, along with his family members, formed several companies and the joint family and his sons were carrying on and were involved in several business activities like spinning, textile, leather, silk, pharmacy, finance, trading, etc, in India at places like Bangalore, Mumbai, - 4 - NC: 2024:KHC:38562-DB WA No. 464 of 2020 Ahmedabad, Kolkata, Nanjanagud, Bhagalpur, etc. With the help of the profits earned from the said business activities, several immovable properties were acquired by Sri B.R. Loyalka and his family members in the name of the Companies so formed and on behalf of the joint family for the benefit of the joint family members in cities like Bangalore, Ahmedabad, Kolkata, and Bhagalpur. The properties, both movable and immovable, acquired by the name of companies formed by Sri B.R. Loyalka and his family members, are all joint family properties and the amounts utilised for the first respondent- Company which is one such company formed by Sri B.R. Loyalka for the benefit and welfare of the joint family members. The petition schedule properties were acquired in the name of the first respondent-Company for and on behalf of joint family members. At the time of the of purchase of the petition schedule properties, Sri R.K. Loyalka was the Chairman of the first respondent-Company. The members of the joint family of Sri B.R. Loyalka and his sons decided to effect partition of their joint family properties, companies, and other assets of the joint family. Accordingly, Sri B.R. Loyalka and his family members in the presence of one Sri K.G. Rungta (a well-wisher of their - 5 - NC: 2024:KHC:38562-DB WA No. 464 of 2020 joint family), effected partition/division of their joint family assets, properties, companies and business activities and in this regard on 30th March 2003, a MOU/SOP was made and executed by Sri B.R. Loyalka and his family members, including the first complainant herein, which had come to affect on 1st April 2003. As per the said MOU/SOP dated 30th March 2003, the petition schedule properties and other properties shown in paragraph 10(a) to (g) of the appeal memorandum, were allotted to the share of the first appellant. The distribution and valuation of various assets of the group have been mentioned in Annexure-C to MOU/SOP. Sri B.R. Loyalka had to transfer shares of the first respondent-Company to the names of the persons named by the first appellant and on payment of said amount, the first respondent-Company stood fully owned by the first appellant. The first appellant had paid amounts to Shri B.R. Loyalka as per the said MOU/SOP and accordingly shares of the first respondent-Company have been transferred to the names of the appellants 1 and 2 and their nominees by Sri S.K. Loyalka. Shri B.K. Loyalka and his wife Smt. N.D. Loyalka mother of the first appellant, have also transferred a portion of immovable property bearing No.4 situated at Moira Street, - 6 - NC: 2024:KHC:38562-DB WA No. 464 of 2020 Calcutta in favour of the appellant No.1 vide registered gift deed dated 4th August 2004 in pursuance of terms of MOU/SOP dated 30th March 2003 and further as per the terms of the MOU/SOP, Sri R.K. Loyalka transferred immovable properties bearing site numbers, B6 (Khata number 456/B6) and B7 (Khata number 456/B7) formed in survey No.50/5 of Yedavanahalli, Attibele hobli, Anekal Taluk in favour of the first appellant through separate Registered Gift Deed dated 21st May

2.1. In pursuance of the memorandum of understanding dated 30th March 2003, the first appellant was put in lawful, peaceful, and exclusive possession, occupation, and enjoyment of the petition schedule properties. At the same time, all the original title deeds and other documents in respect of the petition, schedule properties were also handed over to the appellant by Sri B.K. Loyalka in part performance office obligations and MOU/SOP dated 30th March 2003. Since then, the first appellant is in peaceful possession, occupation and enjoyment of petition schedule properties exercising his rights as absolute owner thereof. Since the said MOU/SOP has been acted upon, the appellants 1 and 2, in terms of Section - 7 - NC: 2024:KHC:38562-DB WA No. 464 of 2020 17(1)(b) of the Registration Act registered two declarations on 10th September 2008 before the respondents 2 and 3 duly remitting the requisite fee. The first respondent, after lapse of more than 12 years from the date of execution of MOU/SOP and after lapse of seven years from the date of execution of declaration, filed a suit in OS No.7418 of 2015 before the City Civil and Sessions Judge, Bengaluru seeking permanent injunction and questioned the MOU/SOP. The said suit is pending consideration. Further, is stated that one Raghavappa Krishnamurthy has also filed a suit in OS No.4817 of 2018 seeking specific performance of MOU before the City Civil and Sessions Judge, Bengaluru, and in the said suit to the first respondent-Company is a party and the said suit is also pending consideration. All the directors of the first respondent company are also parties to the MOU and all the Directors were well aware about the fact that petition schedule properties were allotted to the first respondent and that all the original records have been delivered to him, and he has been exclusively enjoying the said properties since 2003 and in the year 2008, appellants 1 and 2 got registered the declaration of their title with respect to petition schedule properties which were allotted - 8 - NC: 2024:KHC:38562-DB WA No. 464 of 2020 to the first appellant in the year 2003. The first respondent- Company did not raise any objection either about the first appellant's title or about the declaration till 2015 when they filed a suit, and thereafter, after lapse of three years, the first respondent filed the writ petition only to deviate the original suit proceedings.

2.2. It is further stated that respondents 2 and 3 registered the declaration on 10th September 2008, under section 17(1)(b) of the Registration Act. The first respondent filed the petition by wrongly stating that the deeds have been registered under section 18(f) of the Registration Act. The first respondent, after lapse of nearly ten years, filed the petition challenging the said declaration. The learned Single Judge, without giving proper opportunity to the appellants and without ascertaining the fact that the lease deed was executed in the year 2017, not only on the basis of declarations of 2008, but also on the basis of MOU/SOP dated 30th March 2003 through which rights have been conferred upon the first appellant, passed the order dated 23rd September 2019 and also quashed the declarations and lease deed holding that authorities have not followed the procedure properly. Being aggrieved by the - 9 - NC: 2024:KHC:38562-DB WA No. 464 of 2020 order impugned dated 23rd September 2019, present writ appeal is preferred.

3. Learned counsel appearing on behalf of Appellants submits that the learned Single Judge has passed the impugned order without giving proper opportunity, which is contrary to principles of natural justice. He submits that the entire dispute is civil in nature and the civil suits with respect to the same subject matter are pending consideration. When that being the case, writ petition itself is not maintainable. Without giving credence to the said aspect, the learned Single Judge passed the impugned order which is arbitrary, bad in law and liable to be set aside. On all these grounds, the learned counsel sought to allow the appeal.

4. On behalf of the respondents, written objections are filed along with affidavit of one Sri Debabrata Roy, in which it is stated that the averments made in the writ appeal are contrary to the averments made in the writ petition. It is stated in the affidavit that it is true that there was a Memorandum of Understanding dated 30th March 2003 executed between the consent parties to the writ appeal. The said document had - 10 - NC: 2024:KHC:38562-DB WA No. 464 of 2020 been produced as Annexure-E to the writ petition. However, the same is not a registered document. It is a partition deed. A partition that was thought of which was subject to various conditions and the same were not acted upon. It contemplated several preliminary compliances as stated in Clauses 11, 14, 17, 18, 19 and so on. It is further stated that in paragraph number 12 of the appeal it is stated that Sri B.K. Loyalka had to transfer shares of the first respondent-Company by which it is admitted that the company is not owned by Sri B.K. Loyalka. It is stated that the averments made in paragraph 13 to 15 as to the gift deed has no relevance to the present appeal. The first respondent was not aware of the Declaration dated 10th September 2008 and after coming to know about the same, immediately writ petition was filed. There was no occasion to raise objections about the title of the first appellant as the same had not been claimed by the first appellant. Annexures K and L were signed by the first appellant wherein he declares himself to be the owner of the properties in question. It is not signed by anyone else. There cannot be a document transferring rights on immovable property executed by him in favour of himself. The documents have been entered into in - 11 - NC: 2024:KHC:38562-DB WA No. 464 of 2020 Book-I while such documents could not have been entered only in Book-IV. The provisions under Section 51 of the Registration Act mandates different Books to be kept. Further, the provisions of Sections 57(3) and 75 of the Registration Act read with Rule 148 of Karnataka Registration Rules, 1965, do not provide for registration of the document as is done. The documents are being registered in infraction of the provisions of the Act and rules. It is contended that it is settled law that when statute provides for a power to be exercised in a certain way, the same has to be exercised in that way only and such power should not be exercised otherwise. The law mandates that all the documents registered under Section 18(d) and (f) shall be entered in Book-IV as per Section 51(3) of the Act and in the present case, there is no transfer of title as contemplated under Section 17 and as such Section 18(d) of the Act gets attracted. In view of the said provisions of law, the findings given by the learned single judge warrants, no interference.

5. It is submitted that the registration in Book-I and Book-IV makes a lot of difference. Registration in Book-I will find entry in encumbrance and the copies would also be furnished. Hence the learned Counsel submits that the present - 12 - NC: 2024:KHC:38562-DB WA No. 464 of 2020 appeal is not maintainable and accordingly sought for dismissal of the appeal.

6. Learned Counsel appearing for the respondent No.1, adopts the arguments advanced by the learned Government Advocate and supports the order passed by the Single Judge and prays for dismissal of appeal.

7. We have examined the material placed before the court. Respondent No.1 had filed writ petition seeking quashing of two deeds of declaration dated 10th September 2008 and 16th December 2017. Annexure-K is the deed of declaration dated 10th September 2008 in which one Sri S.K. Loyalka, who is the appellant himself, has declared that in pursuance of MOU/SOP dated 30th March 2003, he has been put into possession of the suit property and is entitled to deal with the suit property as he deems it fit and proper. The said MOU/SOP dated 30th March 2003 has been witnessed by one Sri R.P. Bhatnagar and one Sri Hari Shankar. The respondent No.2 has registered the above said Annexure K and L. After verification of the title deeds, the registered documents has been entered into Book-I. The encumbrance certificate would disclose that - 13 - NC: 2024:KHC:38562-DB WA No. 464 of 2020 said declarations are produced before the Court as Annexure M and N. In pursuance of the declaration so executed and registered on 16th December 2017, Appellant No.1-Zenith Credit Limited and appellant No.2-Urmila Loyalka have executed a registered lease deed in favour of Vikram Kumar @ Vikram Jain who is appellant No.3. On examination of the materials, the learned Single Judge has observed that Section 51(3) of the Registration Act, 1908 provides that in Book-IV shall be entered all documents registered under Clauses (d) and (f) of Section 18 of the Act, which do not relate to immovable property. The documents in question are not required to be registered under Section 17 of the Act as no transfer of title is affected by execution of the said documents. It is also observed that the documents Annexure-K and L fall within the ambit and scope of Section 18(f) of the Act, which provides that all documents not required by Section 17 to be registered. The documents in question ought to have been registered in Book-IV. However, the said documents have been registered in Book-I and not in Book-IV. Section 55(5) of the Act provides that index No.IV shall contain the names and addresses of all the persons executing and of all persons - 14 - NC: 2024:KHC:38562-DB WA No. 464 of 2020 claiming under every document entered in Book-IV. Similarly, Section 57(3) of the Act provides that subject to the same provisions, copies of entries in Book-IV and in the index relating thereto shall be given to any person executing or claiming under the documents to which such entries respectively refer or to his agent or representative. The learned Single Judge referred Rule 148 of the Registration Rules and held that in view of provisions of Section 51(3) and 18(f) and Sections 55(5) and 57(3) as also Rule 148 of Karnataka Registration Rules, that the Sub-Registrar has violated the provisions of aforesaid requirements prescribed Registration Act as well as the Rules framed thereunder. On the ground of violation of aforesaid provisions of Karnataka Registration Act and Rules. the learned Single Judge has rightly quashed the declaration and also held that in view of deed of declaration and lease deed said to have been executed by the appellants 1 and 2 in favour of Appellant No.3 loses consequence in law.

8. The learned Counsel for the appellants submitted that the impugned order passed by the learned Single Judge is without providing proper opportunity to the appellants which is - 15 - NC: 2024:KHC:38562-DB WA No. 464 of 2020 contrary to principles of natural justice. On perusal of the material placed before us, it is clear that the learned Single Judge has issued notice to the present appellants and same were duly served. Despite they have remained absent. Hence, it cannot be said that the impugned order is opposed to principles of natural justice. Hence the arguments advanced by the counsel for the appellants cannot be accepted. Even in the absence of the appellants, the learned Single Judge, on due consideration of relevant provisions of law and facts, has passed the impugned order. On consideration/examination of the entire material placed on record, we do not find any illegality in the order passed by the learned Single Judge.

9. In the result appeal fails and is accordingly dismissed. Sd/- (ANU SIVARAMAN) JUDGE Sd/- (G BASAVARAJA) JUDGE List No.: 1 Sl No.: 17