MAHARASHTRA PROTECTION OF INTEREST OF DEPOSITORS (IN FINANCIAL ESTABLISHMENTS) ACT, 1999 – Ss. 2(c), 2(d) & 3 – “Deposit” – “Financial Establishment” – Scope and ambit – Loan transaction – Whether excluded from concept of deposit – Fraudulent default – Maintainability of proceedings under MPID Act – Distinction between civil dispute and statutory remedy under MPID Act – Failure of proceedings under IPC – Effect.

 APEX COURT HELD THAT 

MAHARASHTRA PROTECTION OF INTEREST OF DEPOSITORS (IN FINANCIAL ESTABLISHMENTS) ACT, 1999 – Ss. 2(c), 2(d) & 3 – “Deposit” – “Financial Establishment” – Scope and ambit – Loan transaction – Whether excluded from concept of deposit – Fraudulent default – Maintainability of proceedings under MPID Act – Distinction between civil dispute and statutory remedy under MPID Act – Failure of proceedings under IPC – Effect.

Appellants advanced aggregate amount of Rs.2.51 crores to respondents for business purpose on assurance of repayment with interest at 24% per annum payable quarterly – Respondents admitted receipt of amounts but failed to repay principal and interest – Appellants initiated civil proceedings, cheque dishonour proceedings and criminal proceedings under IPC which failed on ground that dispute was civil in nature – Thereafter appellants invoked provisions of Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 seeking action under Section 3 – High Court dismissed proceedings holding that transaction was merely “loan transaction”, respondents were not “financial establishments” and no cognizable offence under MPID Act was made out – Sustainability.

Held : Definition of “deposit” under Section 2(c) MPID Act is of widest amplitude and includes any receipt of money by any financial establishment to be returned after specified period with or without benefit in form of interest, bonus or profit. Legislature deliberately employed expansive expressions such as “any receipt of money”, “any financial establishment” and “in any other form” to cast broad protective net in favour of depositors. Definition is inclusive and not restrictive in nature.

Essential ingredients of “deposit” are (i) receipt of money by financial establishment, (ii) obligation to return such money after specified period or otherwise, and (iii) return with or without interest or other benefit. All these ingredients stood satisfied in present case since respondents admittedly received amounts from appellants with assurance of repayment together with quarterly interest.

Merely describing transaction as “loan” does not exclude it from ambit of “deposit” under Section 2(c). Nomenclature of transaction is irrelevant. Court must examine intrinsic attributes and substance of transaction and not label assigned to it. Even a loan transaction would amount to “deposit” if it satisfies statutory ingredients under MPID Act.

Definition of “financial establishment” under Section 2(d) is equally broad and includes “any person” accepting deposits under any arrangement or in any other manner. Private individuals receiving deposits and defaulting in repayment are also covered within expression “financial establishment”.

Failure of criminal proceedings under IPC or finding that dispute is civil in nature does not bar invocation of remedies under MPID Act. Proceedings under IPC and action under MPID Act operate in distinct statutory spheres with separate ingredients and objectives. Complaint under Section 3 MPID Act constitutes independent statutory remedy.

State of Maharashtra v. 63 Moons Technologies Ltd., relied on.

(Paras 5 to 6.8)

HELD

Definition of “deposit” under Section 2(c) MPID Act is intentionally broad and inclusive, comprehending any receipt of money to be returned after specified period with or without interest or other benefit. (Paras 5.2 to 5.4.5)

To constitute “deposit”, three elements are necessary: receipt of money by financial establishment, obligation to return money after specified period, and return with or without interest or benefit. (Paras 6 and 6.1)

Use of expression “loan transaction” is not determinative. Substance and attributes of transaction prevail over nomenclature and even loan transactions may fall within ambit of “deposit” under MPID Act. (Para 6.3)

Expression “financial establishment” includes any person accepting deposits in any manner and is not confined to organised financial institutions or public schemes alone. (Paras 5.2.2 to 6.2)

Failure to establish offences under IPC does not create embargo against proceedings under MPID Act since both remedies operate in distinct statutory domains. (Paras 6.4 to 6.7)

RESULT

Appeal allowed. Judgment of High Court set aside. Appellants held entitled to invoke Section 3 and pursue remedies under Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999 against respondents.

ARBITRATION AND CONCILIATION ACT, 1996 – S. 7(5) – Arbitration agreement by incorporation – Reference to earlier agreement – Distinction between “mere reference” and “incorporation by reference” – Development Agreement containing arbitration clause – Permanent Alternate Accommodation Agreements subsequently executed – Clause providing that all terms and conditions of earlier Development Agreement shall form part of later agreements and all clauses shall be binding – Whether arbitration clause incorporated – Scope. Developer entered into Development Agreement with Co-operative Housing Society containing arbitration clause under Clause 36 – Subsequently entered into Permanent Alternate Accommodation Agreements with individual society members – Later agreements contained Clause 14 providing that all terms and conditions of Development Agreement shall be construed to form part of said agreements and all clauses thereof shall be binding on parties – Members instituted proceedings before Consumer Commission – Developer invoked arbitration clause and sought appointment of arbitrator under Section 11 of Arbitration Act – High Court dismissed applications holding that arbitration clause in Development Agreement was not specifically incorporated into later agreements and that mere reference to earlier agreement was insufficient under Section 7(5) – Sustainability.

 

APEX COURT HELD THAT 

ARBITRATION AND CONCILIATION ACT, 1996 – S. 7(5) – Arbitration agreement by incorporation – Reference to earlier agreement – Distinction between “mere reference” and “incorporation by reference” – Development Agreement containing arbitration clause – Permanent Alternate Accommodation Agreements subsequently executed – Clause providing that all terms and conditions of earlier Development Agreement shall form part of later agreements and all clauses shall be binding – Whether arbitration clause incorporated – Scope.

Developer entered into Development Agreement with Co-operative Housing Society containing arbitration clause under Clause 36 – Subsequently entered into Permanent Alternate Accommodation Agreements with individual society members – Later agreements contained Clause 14 providing that all terms and conditions of Development Agreement shall be construed to form part of said agreements and all clauses thereof shall be binding on parties – Members instituted proceedings before Consumer Commission – Developer invoked arbitration clause and sought appointment of arbitrator under Section 11 of Arbitration Act – High Court dismissed applications holding that arbitration clause in Development Agreement was not specifically incorporated into later agreements and that mere reference to earlier agreement was insufficient under Section 7(5) – Sustainability.

Held : Section 7(5) of Arbitration and Conciliation Act recognises arbitration agreement by incorporation where contract in writing refers to another document containing arbitration clause and such reference demonstrates intention to make arbitration clause part of contract. Distinction exists between “mere reference” to another document and “incorporation by reference”. Where parties merely refer to another document for limited purpose, arbitration clause therein does not automatically become part of later contract. However, where later agreement expressly stipulates that all terms and conditions of earlier agreement shall form part of later agreement and all clauses thereof shall bind parties, intention to bodily import entire earlier agreement, including arbitration clause, stands unequivocally established.

Clause 14 of Permanent Alternate Accommodation Agreements clearly manifested intention of parties to incorporate Development Agreement “body and soul” into later agreements. This was not limited or contextual reference but complete assimilation of earlier agreement into subsequent contracts. Consequently, arbitration clause contained in Clause 36 of Development Agreement stood validly incorporated into later agreements by operation of Section 7(5).

High Court erred in holding that specific reiteration of arbitration clause in subsequent agreements was necessary. Once parties consciously agreed that all clauses of earlier agreement would bind them, arbitration clause automatically became enforceable against society members who were parties to later agreements.

M.R. Engineers and Contractors Pvt. Ltd. v. Som Datt Builders Ltd. and NBCC (India) Ltd. v. Zillion Infraprojects Pvt. Ltd., followed.

(Paras 8 to 13)

HELD

Section 7(5) contemplates incorporation of arbitration clause from one document into another where written contract clearly demonstrates intention to adopt terms of earlier document as part of later agreement. (Paras 8 and 9)

Distinction must be maintained between mere reference to another document and incorporation by reference. In case of incorporation, terms and conditions of referred document stand bodily lifted into later contract including arbitration clause, unless inconsistent. (Para 9)

Where later agreements expressly provided that all terms and conditions of Development Agreement shall form part of subsequent agreements and all clauses thereof shall bind parties, arbitration clause in Development Agreement stood incorporated into subsequent agreements. (Paras 11 and 12)

High Court committed error in treating Clause 14 as mere general reference and in holding that separate arbitration clause was necessary in Permanent Alternate Accommodation Agreements. (Para 13)

RESULT

Appeals allowed. Impugned order of High Court set aside. Sole Arbitrator appointed under Section 11 of Arbitration and Conciliation Act, 1996 to adjudicate disputes between parties. 

CODE OF CIVIL PROCEDURE, 1908 – Or. VI Rr. 1, 2 & 4 – Pleadings – Material facts and evidence – Distinction between facta probanda and facta probantia – Deficiency in pleadings – When cannot be raised in appeal – RENT CONTROL LAW – Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 – Ss. 5(3), 13(1)(g), 13(1)(l) & 13(2) – Eviction – Bona fide requirement – Co-landlord – Comparative hardship – Alternative accommodation – Oral family arrangement – Subsequent events – Revisional interference with concurrent findings – Scope.

 APEX COURT HELD THAT 

CODE OF CIVIL PROCEDURE, 1908 – Or. VI Rr. 1, 2 & 4 – Pleadings – Material facts and evidence – Distinction between facta probanda and facta probantia – Deficiency in pleadings – When cannot be raised in appeal – RENT CONTROL LAW – Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 – Ss. 5(3), 13(1)(g), 13(1)(l) & 13(2) – Eviction – Bona fide requirement – Co-landlord – Comparative hardship – Alternative accommodation – Oral family arrangement – Subsequent events – Revisional interference with concurrent findings – Scope.

Eviction suit instituted by co-owner/co-landlord seeking eviction of tenant from flat on grounds of bona fide requirement, comparative hardship and acquisition of alternative accommodation by tenants – Trial Court and Appellate Bench concurrently decreed eviction holding landlord’s requirement genuine and tenants possessed alternate accommodation – High Court in revision reversed concurrent findings and dismissed suit holding that landlordship and family arrangement had not been specifically pleaded and that plaintiff relied upon unpleaded case through evidence – Sustainability.

Held : Pleadings are required to contain only material facts constituting cause of action or defence and not evidence by which such facts are to be proved. Distinction between facta probanda (material facts to be proved) and facta probantia (evidence proving such facts) is fundamental. Family arrangement, share certificates and internal allocation among co-owners constituted evidentiary particulars supporting pleaded status of co-landlord and bona fide requirement and need not themselves have been separately pleaded in plaint.

Plaint specifically pleaded that plaintiffs and family members were landlords of suit building and sought eviction on statutory grounds under Rent Act. Such averments sufficiently disclosed material facts necessary for cause of action. Subsequent affidavit evidence elaborating family arrangement, shareholding and residential necessity merely furnished proof of pleaded facts. Both tests of pleading and proof stood satisfied.

Deficiency in pleadings cannot ordinarily be raised for first time in appeal where parties understood controversy, went to trial fully conscious of issues involved and adduced evidence thereon. Defendants had full opportunity to contest plaintiff’s status as co-landlord and bona fide requirement and actively participated in trial.

Share certificates evidencing co-ownership in leased land and building conclusively established plaintiff’s status as co-owner and consequently co-landlord within meaning of Section 5(3) of Bombay Rent Act. By virtue of Section 8 of Transfer of Property Act, transfer of land carries incidents attached to earth including building constructed thereon. Co-owner entitled to receive rent falls squarely within statutory definition of landlord.

Courts are entitled in appropriate circumstances to consider subsequent events to render relief meaningful and in accord with present realities, provided fairness to parties is maintained. Oral family arrangement allocating residential use among siblings is legally permissible and enforceable even absent formal partition. Such arrangement could legitimately be relied upon to explain continuing bona fide need and hardship.

Temporary occupation by landlord of adjoining flats during pendency of proceedings did not extinguish bona fide requirement where accommodation remained insufficient for entire family and premises were earmarked for exclusive use of brothers under family arrangement. Tenant cannot dictate manner in which landlord should utilise available premises.

Concurrent findings established that tenants had acquired alternative accommodation and sale of alternate premises during pendency of suit was effected only to defeat eviction proceedings. Comparative hardship overwhelmingly favoured landlord who continued without suitable accommodation in Mumbai. High Court exceeded revisional jurisdiction in upsetting concurrent factual findings unsupported by perversity.

(Paras 25 to 60)

HELD

Pleadings must contain material facts constituting cause of action or defence but need not contain evidence by which such facts are to be proved. Distinction between facta probanda and facta probantia must be maintained. (Paras 26 to 34)

In eviction suit under Rent Act, plaintiff is required to plead and prove only existence of landlord-tenant relationship and statutory grounds for eviction. Detailed evidentiary particulars such as family arrangement or share certificates are matters of proof and not essential pleadings. (Paras 35 to 40)

Where parties understood controversy, led evidence and went fully to trial, objection regarding deficiency in pleadings cannot ordinarily be permitted to be raised at appellate stage. (Para 41)

Co-owner entitled to receive rent answers statutory definition of landlord under Section 5(3) of Bombay Rent Act. Share certificates relating to land and building sufficiently established plaintiff’s status as co-landlord. (Paras 42 to 46)

Court may take cognisance of subsequent events and oral family arrangements while adjudicating bona fide requirement so as to render relief just, meaningful and consistent with current realities. (Paras 47 to 50)

Temporary occupation of available premises by landlord during pendency of litigation does not negate bona fide requirement where accommodation is insufficient and comparative hardship weighs in landlord’s favour. (Paras 51 to 60)

RESULT

Appeal allowed. Judgment of High Court set aside. Concurrent judgments and decree of eviction passed by Small Causes Court and Appellate Bench restored.

CODE OF CIVIL PROCEDURE, 1908 – Or. VII R. 11 – Rejection of plaint – Second application under O. VII R. 11 – Res judicata – Interlocutory res judicata – Scope – HINDU SUCCESSION ACT, 1956 – Ss. 6, 6(5) & 8 – Partition suit by daughters – Pre-2004 partition – Saving clause – Independent right of daughters as Class I heirs – Maintainability of suit. Plaintiffs/daughters instituted suit for partition claiming share in properties of father who died intestate in 1985 – Defendants relied on registered Partition Deed dated 16.06.2000 and earlier oral partition/Palupatti to contend that daughters had no share – Earlier application under Order VII Rule 11(d) CPC seeking rejection of plaint on ground of statutory bar under Section 6 HSA dismissed by High Court in Regular First Appeal holding that even assuming validity of partition and absence of coparcenary rights, daughters had right in father’s share under Section 8 HSA – Said order attained finality – After more than eight years, legal representatives of one defendant filed second application under Order VII Rule 11(a), (b) and (d) CPC relying on decision in Vineeta Sharma v. Rakesh Sharma and contending that Section 6(5) HSA barred suit – High Court allowed revision, rejected plaint and held that Section 6(5) saved partition deed and operated as bar – Sustainability. Held : Second application under Order VII Rule 11 CPC was barred by principles of res judicata and interlocutory res judicata. Issue whether plaint was liable to be rejected on ground of statutory bar under Section 6 HSA had already been directly and substantially decided by High Court in earlier proceedings and attained finality. Defendants and legal representatives litigated under same title within meaning of Explanation VI to Section 11 CPC. Mere invocation of additional sub-clauses of Order VII Rule 11 CPC in subsequent application did not alter substance of controversy.

 APEX COURT HELD THAT

CODE OF CIVIL PROCEDURE, 1908 – Or. VII R. 11 – Rejection of plaint – Second application under O. VII R. 11 – Res judicata – Interlocutory res judicata – Scope – HINDU SUCCESSION ACT, 1956 – Ss. 6, 6(5) & 8 – Partition suit by daughters – Pre-2004 partition – Saving clause – Independent right of daughters as Class I heirs – Maintainability of suit.

Plaintiffs/daughters instituted suit for partition claiming share in properties of father who died intestate in 1985 – Defendants relied on registered Partition Deed dated 16.06.2000 and earlier oral partition/Palupatti to contend that daughters had no share – Earlier application under Order VII Rule 11(d) CPC seeking rejection of plaint on ground of statutory bar under Section 6 HSA dismissed by High Court in Regular First Appeal holding that even assuming validity of partition and absence of coparcenary rights, daughters had right in father’s share under Section 8 HSA – Said order attained finality – After more than eight years, legal representatives of one defendant filed second application under Order VII Rule 11(a), (b) and (d) CPC relying on decision in Vineeta Sharma v. Rakesh Sharma and contending that Section 6(5) HSA barred suit – High Court allowed revision, rejected plaint and held that Section 6(5) saved partition deed and operated as bar – Sustainability.

Held : Second application under Order VII Rule 11 CPC was barred by principles of res judicata and interlocutory res judicata. Issue whether plaint was liable to be rejected on ground of statutory bar under Section 6 HSA had already been directly and substantially decided by High Court in earlier proceedings and attained finality. Defendants and legal representatives litigated under same title within meaning of Explanation VI to Section 11 CPC. Mere invocation of additional sub-clauses of Order VII Rule 11 CPC in subsequent application did not alter substance of controversy.

Decision in Vineeta Sharma v. Rakesh Sharma did not constitute change in law affecting foundation of earlier judgment. Earlier order proceeded not on basis of coparcenary rights under amended Section 6 but on independent rights of daughters as Class I heirs under Section 8 upon intestate death of father. Said legal position remained unaffected by Vineeta Sharma.

Section 6(5) HSA is only saving clause preserving partitions effected before 20.12.2004 through registered deed or decree of Court from operation of amended coparcenary rights introduced in 2005 Amendment. Provision does not create jurisdictional bar to institution of partition suit. Whether alleged partition was valid, binding and enforceable against daughters who were not parties thereto are mixed questions of fact and law requiring trial and evidence.

Under proviso to erstwhile unamended Section 6 read with Section 8 HSA, where Hindu male died intestate leaving behind female Class I heirs, his undivided interest in coparcenary property devolved by intestate succession and not survivorship. Thus, daughters acquired independent right in father’s share immediately upon his death in 1985, wholly independent of 2005 Amendment and unaffected by Section 6(5).

At stage of Order VII Rule 11 CPC, Court must confine itself to plaint averments and cannot adjudicate disputed questions relating to validity of partition, oral family arrangement, relinquishment or estoppel. High Court exceeded revisional jurisdiction under Section 115 CPC by virtually deciding merits of suit at threshold stage.

Satyadhyan Ghosal v. Deorajin Debi; Mathura Prasad Bajoo Jaiswal v. Dossibai Jeejeebhoy; Vineeta Sharma v. Rakesh Sharma; Ganduri Koteshwaramma v. Chakiri Yanadi; Nusli Neville Wadia v. Ivory Properties; Mayar (H.K.) Ltd. v. Owners & Parties, Vessel M.V. Fortune Express, followed and relied on.

(Paras 35 to 71)

HELD

Principle of res judicata applies not only between separate suits but also between successive stages of same litigation. Once High Court had finally decided maintainability of plaint in earlier Order VII Rule 11 proceedings, same issue could not be reagitated through subsequent application by another defendant litigating under same title. (Paras 34 to 42)

Section 6(5) HSA is merely saving clause protecting completed pre-20.12.2004 partitions from operation of amended Section 6 and does not create jurisdictional bar to institution of suit for partition. (Paras 47 to 53)

Whether registered partition deed executed without participation or consent of daughters is valid and binding upon them constitutes mixed question of fact and law requiring adjudication at trial and cannot be conclusively determined under Order VII Rule 11 CPC. (Paras 54 to 58)

Upon intestate death of Hindu male in 1985 leaving behind daughters as Class I heirs, proviso to erstwhile Section 6 read with Section 8 HSA caused his undivided coparcenary interest to devolve by succession and not survivorship. Such right accrued independently of 2005 Amendment and survives irrespective of Section 6(5). (Paras 59 to 67)

High Court exceeded scope of revisional jurisdiction under Section 115 CPC by undertaking de novo adjudication on merits and rejecting plaint despite existence of disputed questions requiring evidence. (Paras 68 and 69)

RESULT

Appeal allowed. Judgment of High Court rejecting plaint set aside. Order of Trial Court dismissing second application under Order VII Rule 11 CPC restored. Plaint in partition suit restored to file. Status quo regarding suit properties directed to continue pending trial.

Medical education – Closure/De-recognition of private medical college – Relocation of students – Liability for fees – Equitable apportionment – Interim directions under Art. 142 – Liability of defaulting institution – Rights of transferee colleges and students.

 APEX COURT HELD THAT 

EDUCATION LAW – Medical education – Closure/De-recognition of private medical college – Relocation of students – Liability for fees – Equitable apportionment – Interim directions under Art. 142 – Liability of defaulting institution – Rights of transferee colleges and students.

Students admitted to private medical college (SRMCH) for MBBS course during academic sessions 2013-2014 and 2014-2015 – MCI/NMC inspections revealed serious deficiencies in infrastructure, faculty and regulatory compliance leading to denial of renewal of recognition – Students relocated by judicial orders to recognised private medical colleges to save academic careers – Interim directions of Supreme Court permitted continuation of studies on payment of Government-rate fees – Transferee colleges sought reimbursement of differential fees and stipend amounts – Selvam Trust contended that liability could not be fastened without adjudication of deficiencies – Determination of liability.

Held : Present controversy confined not to legality of relocation but to fair and equitable apportionment of financial liabilities arising from extraordinary judicial intervention undertaken to protect academic interests of students. Since no material existed to show availability of Government quota seats in transferee colleges, all relocated students were deemed to have been accommodated against private/management quota seats and fee structure applicable to such seats governed determination of liability.

Students had consciously taken admission in private medical institution having substantially higher fee structure than Government colleges. Benefit of Government-rate fees granted pursuant to interim orders of Supreme Court was only emergent and temporary arrangement devised to protect students from losing academic years owing to deficiencies of institution. Such interim arrangement could not confer permanent financial windfall upon students.

Deficiencies found by MCI/NMC in infrastructure and faculty of SRMCH stood substantially affirmed upon dismissal of writ petition filed by institution challenging denial of renewal. Defaulting institution could not be permitted to derive benefit from its own wrong. Applying maxim Commodum ex injuria sua nemo habere debet, primary liability for financial consequences arising from relocation was fastened upon Selvam Trust/SRMCH.

Amounts secured by bank guarantees furnished by Selvam Trust with MCI/NMC and deposits made before Supreme Court together with accrued interest directed to be disbursed equally amongst transferee colleges. Students held liable to pay remaining outstanding fees at rates chargeable by SRMCH and not merely Government-rate fees. Transferee colleges permitted to approach NMC for recovery of remaining shortfall from passed-out students after adjusting amounts already paid by them to SRMCH.

Court clarified that observations in judgment would not prejudice independent claims or defences of Selvam Trust in appropriate proceedings.

(Paras 24 to 54)

HELD

Interim directions issued under Article 142 permitting students to continue MBBS course at Government-rate fees were emergent measures intended to preserve academic continuity and could not result in unjust enrichment of students admitted to private medical institution. (Paras 29 to 36)

Where relocated students were accommodated in private medical colleges against management/private quota seats, applicable fee structure of such category governed determination of liabilities. (Paras 25 and 26)

Defaulting institution whose deficiencies resulted in denial of renewal of recognition could not avoid primary liability for financial consequences arising from relocation of students. (Paras 37 to 42)

Students who completed medical course pursuant to protective interim orders of Supreme Court could not claim permanent benefit of highly subsidised Government-rate fees when they had originally contracted for admission in private medical college. (Paras 48 to 52)

Bank guarantee amount furnished by Selvam Trust and deposits made before Supreme Court directed to be released and distributed equally amongst transferee colleges towards reimbursement of fees. (Paras 44 to 47)

RESULT

Amounts covered by bank guarantees furnished by Selvam Trust with MCI/NMC and deposits made before Supreme Court with accrued interest directed to be distributed equally amongst three transferee colleges. Transferee colleges permitted to seek recovery of remaining fee shortfall from students through NMC mechanism after appropriate adjustments. Appeals closed.