Transfer of Property Act, 1882 – Assignment of receivables – Sanction of financial facility of ₹400 crores to the borrower by the lender – Parties entered into Master Facility Agreement-MFA and Assignment Agreement-AA – As per MFA receivables or rents which borrower is entitled to, form the security for the advance extended to it by the lender and under AA the rents payable to borrower stood unconditionally assigned to the lender – Thereafter, an asset and security freeze order of the borrower by the NCLAT – Subsequently, NCLAT held that the said freeze order did not negate the AA nor did it take away the property right of the lender in the lease rental receivables – Execution of documents by the borrower by which rents were made over to the lender, if constituted an assignment and thus fell outside the scope of an asset and security freeze order made by the NCLAT: Held: Nature and the substance of the transaction is determinative – Application of the rule that all the contemporaneous documents are to be read together, to discern the true purport of the contract, it is evident that what the parties intended was the assignment of the debt-rents payable – There can be a transfer of debts, which are defined as actionable claims – Rents payable by borrower-tenants, lessees and licensees are debts, which stood transferred to the creditor Bank – Reference to pledge, in some places in the documents, did not undermine the fact that the rents payable to and receivable by the borrower stood absolutely assigned to the lender – Thus, the NCLAT’s conclusions are correct. [Para 28, 31, 39] Deeds and document – Interpretation of – Principle of contract interpretation:
Held: Substance of a document, is discernible from its terms, rather than the label or its nomenclature – One document is styled or described in a certain manner, or that it uses a certain expression, or term is not conclusive; it is the effect of all the terms of the documents, which bring out the true purport and intention of the parties – Also where the transaction is not the subject of one document, but several, which refer to each other, or reading of all, describe the entire contract, then, it is open to the court to consider all of them together. [Para 26, 27]
Transfer of Property Act, 1882 – s.3 – Expression ‘actionable claim’ – Meaning of:
Held: Is claim to an unsecured debt other than a debt secured by mortgage of immovable property, or hypothecation or pledge, or beneficial interest in a movable property – Both these are recognised as enforceable – Other claims do not fall within the expression “actionable claim”. [Para 33] LIST OF CITATIONS AND OTHER REFERENCES
Yellapu Uma Maheswari and Ors. vs. Buddha Jagadheeswararao & Ors 2015 [11] SCR 849; Assam Small Scale Ind. Dev. Corp. Ltd. & Ors. v. J.D. Pharmaceuticals & Anr 2005 [4] Suppl. SCR 232; V. Lakshmanan v. B.R. Mangalagiri & Ors 1994 Supp [6] SCR 561; Super Poly Fabriks Ltd. vs. Commissioner of Central Excise, Punjab 2008 (6) SCR 1076; S. Chattanatha Karayalar v The Central Bank of India & Ors 1965 [3] SCR 318; Mewa Lal and Ors. vs. Tara Rani AIR 1973 All 165 : 1973 [2] SCR 377; Sunrise Associates vs Govt. Of NCT of Delhi 2006 Supp(2) SCR 421; Noor & Ors. v G.S. Ibrahim (Dead) by Lrs 2003 Supp [2] SCR 204; ICICI Bank v Official Liquidator of APS Star Industries Ltd 2010 [12] SCR 644 – referred.
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As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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