26 May 2025 Property Law >> Personal Law  

The Maharashtra Industrial Development Corporation (MIDC) filed a writ petition challenging a January 18, 2011, judgment by the Debts Recovery Appellate Tribunal (DRAT) in Mumbai. The DRAT's decision partially allowed an appeal by MIDC and issued various directions to resolve a dispute concerning Plot No. D-9 in the Marol MIDC Area.

The plot was originally allotted to M/s. Benelon Industries (BI) by MIDC on a 95-year lease in 1979. The lease included clauses restricting assignment or subletting without MIDC's prior consent and allowing re-entry in case of a breach. BI later obtained financial assistance from the Union Bank of India (UBI) and mortgaged the plot without MIDC's consent, which was a breach of the lease terms. When BI defaulted on its loan, UBI initiated recovery proceedings, leading to an ex-parte decree against BI in 1996. The execution proceedings were later transferred to the Debts Recovery Tribunal (DRT) after the enactment of the Recovery Of Debts Due To Banks And Financial Institutions Act, 1993.

MIDC discovered unauthorized use of the plot in 2007 and issued a show-cause notice to BI. Meanwhile, the DRT issued a proclamation for the sale of the plot. MIDC's application to raise the attachment on the plot was dismissed by the DRT. The plot was subsequently auctioned in October 2008, with Kalindi Properties Private Limited (KPPL) being the successful bidder. MIDC's appeal against the DRT's order was partly allowed by the DRAT, which issued various directions. The DRAT held that the mortgage created by BI in favor of UBI was not illegal or void, though it constituted a breach of the lease. It directed KPPL to pay subletting charges to MIDC for a specific period.

MIDC challenged the DRAT's judgment, arguing that the mortgage without its consent was void, that KPPL did not acquire valid title, and that the lease had been terminated. MIDC also contended that it was entitled to continuous subletting charges from KPPL based on its regulations. KPPL, on the other hand, argued that MIDC had not taken timely action for the breach of the lease, that the mortgage was at most irregular, and that the subletting charges levied by MIDC lacked legal basis.

The High Court, after reviewing the arguments and evidence, upheld the DRAT's decision. The court found that while the creation of the mortgage by BI was a breach of the lease agreement, MIDC failed to take further steps to enforce its right of re-entry as provided in the lease deed. Therefore, the mortgage could not be deemed void. Regarding the subletting charges, the court noted that the MIDC Regulations of 1975 did not specifically empower MIDC to levy such charges, and a previous High Court decision had found similar circulars lacked legal authority. However, since KPPL did not challenge the DRAT's direction to pay subletting charges for the period from August 2007 to October 2008, that part of the order remained binding on KPPL. The court also declined to entertain MIDC's argument that the UBI decree was vitiated by fraud, as this issue was not raised in earlier proceedings.

The writ petition was ultimately dismissed, and the DRAT's directions were upheld. The court also clarified that other disputes, such as those concerning alleged encroachments, could be adjudicated in pending civil proceedings.