Calcutta High Court
M/S. Anandilal Poddar & Sons Ltd. vs Commissioner, Sanchaita Investments on 21 September, 1998
Equivalent citations: (1999)3CALLT177(HC)
JUDGMENT D.B. Dutta, J.
1. The present matter arises out of the objection preferred by M/s Anadilal Poddar and Sons Limited, a Company incorporated under the Companies Act having its registered office at 36, Chowringhee Road, Calcutta (herein after referred to as Poddars) against the order of attachment passed by the Commissioner, Sanchaita Investments, on 17th September, 1993 in Objection Case No. 166 of 1993 in terms of the orders dated 4.5.83 and 27.9.83 passed by the Supreme Court in writ petitions No. 638-757-800 of 1983.
2. The Sanchaita Investments was a partnership firm established in the year 1975 with the sole object of collecting money by way of deposits alluring the prospective depositors with the offer of incredibly high rate of interest. Within a short period of 3 to 4 years the said firm had been able to collect deposits which mounted to astronomical figure of more than 100 crores of rupees. The partners of the firm realised that it would not be possible for them to continue their business for a long period and that they would have to stop payment of such high rate of interest and close their business. From the very inception they adopted a policy of diverting the funds collected by way of deposits towards acquisition of various assets and properties in various cities of India in the names of their agents, sub agents, family members and close associates with the ulterior motive of secreting all those assets and properties beyond the reach of the depositors and defeating their legitimate claims. The small saving schemes initiated by the State Government were being seriously affected by the business of the Sanchaita Investments which became a matter of grave concern for the State Government. It accordingly applied the Prize Chit and Money Circulation Scheme (Banning) Act, 1978 in relation to the business of Sanchaita Investments with effect from 13.12.80. On that date itself, the FIR under the Act was filed against the firm and in pursuance thereof the raid was also conducted on that very date by the Bureau of investigation at various offices of the firm and also at the residences of its partners leading to seizure of various documents in connection with the business and affairs of the firm as also arrest of its partners and agents. The firm began making defaults in its obligation to the depositors whereupon the depositors approached the High Court and eventually the matters came up to the Supreme Court and with a view to safeguard the interest of the depositors, arrange for a return to them of as much of their deposits as possible and to ensure that the properties of the firm are duly identified and the full and due benefit of the funds diverted from its coffers was restored to the firm, the Supreme Court by its order dated 4th May, 1983 appointed the Commissioner, Sanchita Investments to take charge of all the assets, documents and papers of the firm and by a subsequent order dated 27th September, 1983, conferred large powers upon the Commissioner to attach assets and properties which in his prima facie opinion were of the ownership of the firm or of the ownership of any of its partners, agents, sub agents, transferees and benamders and to put to sale such assets and properties if no objection is received to the attachment within one month from the date of attachment and, if objection is received against the attachement, to forward the same to the designated Sanchaita Bench for adjudication.
This is the long and short of the background in which the Commissioner, Sanchaita Investments was vested by the Supreme Court with extraordinary powers to effect attachment.
3. On 5.12.90, the Commissioner, Sanchaita Investments, by his order attached the entire multi-storied building located at and being premises No. 113, Park Street, Calcutta (commonly known as Poddar Point), including the car parking spaces, fixtures, fittings, land and other appurtenances attached thereto excepting the first, fourth and fifth floors thereof along with corresponding car parking spaces on the assumption that the property was of the ownership of the Sanchaita Investments and/or its partners. Its agents, sub agents, transferees and benamders.
4. M/s Anandilal Poddars preferred an objection against the said attachment dated 5.12.90 and it was duly forwarded to the Sanchaita Bench wherein it was registered as Matter No. 1404 of 1990.
5. By its judgment dated 11.11.92, the Sanchaita Bench upheld this objection and set aside the order of attachment, primarily on the ground that the Commissioner had passed a prototype order without applying his mind.
6. The said judgment of the Sanchaita Bench came up before the Supreme Court in appeals which were allowed by the Supreme Court by its order dated 6.8.93. The Supreme Court agreed with the observation of the Sanchaita Bench that the Commissioner was not justified in passing a prototype order of attachment without applying his mind. The Supreme Court was, however, of the view that the Sanchaita Bench should have sent the matter back to the Commissioner for passing a fresh order of attachment. The Supreme Court, therefore, set aside the order of attachment of the Commissioner as well as the order of the Sanchaita Bench setting aside the Commissioner's order of attachment and remanded the case back to the Commissioner for passing fresh order of attachment, if necessary, within six weeks of the receipt of the order with the direction that the property would remain attached till then.
7. In pursuance of this order of the Supreme Court, the Commissioner, Sanchaita Investments passed a fresh order of attachment on 17th September, 1993 in respect of the self same property. The Commissioner this time disclosed the basis of his prima facie opinion regarding the ownership of the Sanchaita Investments over the property in question in the recitals given in his fresh order of attachment. The gist of his allegations may be stated as follows. Some time in 1980, the Poddars decided to raise a multi-storied building at 113. Park Street, Calcutta. As it was a big project requiring huge funds, the Poddars approached the partners of Sanchaita Investments for finance and they readily agreed to purchase the multi-storied building containing a total covered area of one lakh 45 thousand sq. ft. at a price of Rs. 220 per sq. ft. An agreement was entered into by and between the Poddars and the Sanchaita Investments on 11th September, 1980. The Sanchaita Investments made Investments under the said agreement dated 11.9.80 which remained in tact but it was shown to have been cancelled by subsequent agreements which were all sham and bogus transactions brought into existence in order to defraud the depositors.
8. It is this order of attachment which forms the subject matter of challenge in the present objection petition filed by the Poddars.
9. In challenging this attachment, the Poddars sought to make out the following case.
10. The property attached never belonged to or formed any part of the assets of the Sanchaita Investments. Nor was it of the ownership of the Sanchita Investments or its agents, sub agents, transferees or benamders. The Poddars and its Directors, at no point of time, were the agents, sub agents, transferees or benamders of the Sanchaita Investments. The order of attachment is. therefore, bad and made in gross abuse of the powers conferred by the Supreme Court by its orders dated 4.5.83 and 27.9.83. The recitals, made in the order of attachment, are not sufficient to give rise to a prima facie satisfaction of the fact that the concerned property was of the ownership of the Sanchaita Investments and as such the attachment is liable to be vacated. The agreement dated 11.9.80 referred to in the order of attachment whereby the Sanchaita Investments agreed to purchase the entire building provided for payment of the consideration money according to the following schedule- (i) Rs. 32 lacs as advance on execution of the agreement, (ii) Rs. 32 lacs on the completion of the foundation, (iii) Rs. 32 lacs on the casting of the roof of the ground floor, (iv) Rs. 32 lacs on the casting of the roof of the first floor, (v) Rs 32 lacs on the casting of the roof of the third floor, (vi) Rs. 32 lacs on the casting of the roof of the fifth floor, (vii) Rs. 32 lacs on the casting of the roof of the seventh floor, (viii) Rs. 32 lacs on the casting of the roof of the nineth floor and (ix) the balance sum of Rs. 64 lacs [or any other sum as may be determined) at the time of delivery of possession and execution of the deed of conveyance. According to the terms of this deed of agreement, in the event of the failure to make payment of any of the instalments within the scheduled time, interest would have to be paid at the rate of 15% per annum for the delay and if the period of delay exceeds three months, the liability to pay interest would be at the rate of 30% per annum on the outstanding amounts. The Sanchaita Investments paid Rs. 32 lacs on the date of the agreement and a further sum of Rs. 10 lacs thereafter. Beyond the aforesaid sum of Rs. 42 lacs, the Sanchaita Investments could not make any payment towards the consideration money in terms of that agreement. The Poddars by series of letters addressed to the Sanchaita Investments between 16th January. 1981 and 2nd March 1981 demanded the payment of the instalments as per the schedule fixed by the agreement, but the Sanchaita Investments did neither give any reply to any of the letters nor make any payment in response to their demand. Thereafter, the Poddars and the Sanchaita Investments mututally agreed to have that agreement cancelled on account of default by the Sanchaita Investments in making the payments in terms of the agreement and the Poddars decided to refund the sum of Rs. 42 lacs that was paid by the Sanchaita Investments. The parties also mutually decided to make a deal in respect of some parts of the building. Sanchaita Investments decided to purchase first, fourth and fifth floors of the building from the Poddars and the Poddars ageed to allow adjustment of the sum of Rs. 42 lacs against the price. Accordingly, a deed of cancellation was executed and registered on 24th March, 1981. Following this cancellation, on the self-same date, that is to say, on 24.3.81, another deed of agreement was executed and registered by the Poddars in favour of Sanchaita Investments whereby Sanchaita Investments agreed to purchase the first and the fourth floors of the building at the old rate of Rs. 220 per sq. ft. The total covered area for the first and the fourth floor was 24.500 sq. ft. at the rate of 12,250 sq. ft. per floor and at 'the agreed rate of Rs. 220 per sq. ft., the total price worked out to Rs. 53,90,000 out of which the sum of Rs. 42 lacs that was already paid under the agreement dated 11.9.80 was allowed to be adjusted and the balance sum of Rs. 11,90,000 was paid by the Sanchaita Investments on the date of execution of the agreement dated 24.3.81. The Sanchaita Investments did also agree to purchase eight covered car parking spaces measuring 1600 sq. ft. In area along with the first and fourth floors for which another sum of Rs. 2.52,000 was agreed to be paid by the Sanchaita Investments to the Poddars in terms of the said agreement dated 24.3.81 at the time of handing over the possession of the said two floors. Subsequently, another agreement was executed and registered by the Poddars in favour of Sanchaita Investments on 11.5.81 for sale of the fifth floor of the building with a covered area 12,250 sq. ft. for which the price was settled at the old rate of Rs. 220 sq. ft. which worked out to Rs. 26,95,000. This amount was paid on 11.5.81 by Sanchaita Investments. Moreover, by this agreement, Sanchaita Investments agreed to purchase also the four car parking spaces along with the fifth floor for which the price was fixed at Rs. 1.76 lacs. It was agreed that the price of these car parking spaces would be paid on delivery of possession of the fifth floor. The first, fourth and fifth floors of the building were subsequently handed over to various parties nominated by Sanchaita Investments in terms of orders passed from time to time by High Court and the Supreme Court in various proceedings. The Commissioner had attached the fifth floor of the building as the property of the Sanchaita Investments and sold the same. For the car parking space, the sum of Rs. 1,76,000 is still due to the Poddars. All the transactions entered into by and between the Sanchaita Investments and the Poddars subsequent to the original deed of agreement dated 11.9.80 were bona fide commercial transactions. The Poddars. In fact, had sold out the different flats to different parties after cancellation of the original agreement dated 11.9.80 and the purchasers have all taken possession by paying consideration. Besides the amounts which are said to have been received by the Poddars from Sanchaita Investments, no other fund or finance was received from Sanchaita Investments or its partners, agents or sub agents and the Poddars completed the construction of the building by the finance received from bank, financial institutions as well as money received from assignees and purchasers of other portions of the building. The Poddars were managing the affairs of this building and collecting maintenance charges from owners and occupiers of the flats of the building. The impugned attachment is also barred by limitation and acquiescence.
11. The Commissioner afirmed an affidavit-in-opposition against the affidavit affirmed by the objector in support of its objection referred to above. It is alleged by the Commissioner that the agreement dated 24.3.81 purporting to cancel the earlier agreement dated 11.9.80 was vitiated by fraud and was brought into existence by collusion between the promoters of the building and the partners of Sanchaita Investments with the object of defrauding the depositors. The agreement dated 1.9.80 did not entitle the Poddars to cancel it in the event of default in payment of the purchase price by Sanchaita Investments. The Sanchaita Investments and the Poridars carefully kept the agreement dated 11.9.80 concealed from the depositors with a view to eliminate any challenge to the purported agreement for its cancellation. The ground of cancellation of the agreement was fictitious. The agreement dated 11.9.80 for purchase of the entire building is still enforceable and the Commissioner has sufficient funds to pay the balance amount under the said agreement. It is necessary for the Commissioner to file a suit for specific performance of contract. Such relief can be granted by this Court in this proceeding and the law of limitation has got no application to this case. The purported surrender of the valuable right of Sanchaita Investments to acquire the ownership of the premises by the agreement dated 24.3-81 was without any justification. It was sham and collusive aimed at defrauding the depositors.
12. The Poddars affirmed an affidavit-in-reply denying the material allegations of the Commissioner and reiterating its assertions made in their objection petition for vacating the order of attachment.
13. The point for our decision would be whether the impugned order dated 17.9.83 of attachment is required to be made absolute or set aside or modified otherwise.
14. By order dated 27.9.83. the Commissioner has been empowered by the Supreme court to attach any asset or property of Sanchaita Investments or its partners which, in his opinion, is of the ownership of the Sanchaita Investments or of the ownership of any of the partners, agents, sub agents, transferees and benamders. The Commissioner has effected the impugned attachment on the footing that the property attached is the property of Sanchaita Investments. It is not disputed on behalf of the Commissioner that the land upon which the bulding stands did originally belong to the Poddars and that the building was also constructed by the Poddars. It is not the case of the Commissioner that Poddars were in any way connected with Sanchaita Investments or its business at any point of time prior to the making of the agreement dated 11.9-80. It is on the basis of this agreement dated 11.9.80 that Sanchaita Investments is said to have acquired this property under attachment. The said agreement is marked Annexure 'H' to the objection petition.
15. On perusal of the terms and conditions of this agreement. It would appear that it purports to be an agreement for sale of the entire building, then under construction, by the Poddars to Sanchaita Investments. Section 54 of the Transfer of Property Act expressly provides that a contract for sale of immoveable property does not of itself create any interest in or charge on such property. The Law of India does not recognize any equitable estate and section 54 of the Transfer of Property Act abolishes the English doctrine that a contract for sale transfers an equitable estate to the purchaser. But nevertheless it creates an obligation recognised by section 2 of the Specific Relief Act and is annexed to the ownership of the property even though it does not amount to an interest therein and under section 40 of the Transfer of Property Act. the benefit of an obligation arising out of contract and annexed to the ownership of immovable property but not amounting to an interest therein is enforceable against a transferee with notice thereof or a gratuitious transferee of the property affected thereby but not against a transferee for consideration and without notice of the right or obligation. Of course, it is not in dispute that on the of execution of this agreement, the first instalment of Rs. 32 lacs that was payable on execution of this deed was paid by the Sanchaita Investments to the Poddars. That being so, such payment shall opertate as a statutory charge in favour of the buyer, the Sanchaita Investments, within the meaning of section 55(6)(b) of the Transfer of Property Act. It is also not in dispute that subsequent to the execution of this deed of agreement, a further sum of Rs. 10 lacs was paid towards the consideration money by Sanchaita Investments. As such, under the law despite creation of a statutory charge under section 55(6)(b) upon the property concerned in favour of Sanchaita Investments, at most to the extent of Rs. 42 lacs that has been paid towards the purchase money, the agreement itself or the payment of the said amount of Rs. 42 lacs could not have the effect of transfer of the property in favour of Sanchaita Investments. The result would be that the property did continue to remain the property of the Poddars subject, however, to a statutory charge as also the benefit under the agreement in favour of the Sanchaita Investments. It has been observed by the Sanchaita Bench in 89 CWN 509 corresponding to 1985(1) CHN 95: Punjab National Bank v. Sanchaita Investments and Ors. that the benefit of a contract of sale is undoubtedly a property in the wider sense of the term as contemplated by section 6 of the Transfer of Property Act. Of course, the Commissioner has not attached the property as the property of the Sanchaita Investments in the sense that tt is the holder of a statutory charge and the benefit arising out of the agreement for sale dated 11.9.80 as suggested above. Incidentally, it may be pointed out here that the Sanchaita Bench in Punjab National Bank's case (supra) had occasions to deal with somewhat similar situation. There was also an agreement for sale of an immovable property in favour of Sanchaita Investments by the Poddars upon acceptance of an amount as earnest money and the Commissioner attached that property as the property of Sanchaita Investments. The said agreement is none but the agreement dated 11.5.81 in respect of the fifth floor of this very building at premises No. 113. Park Street, Calcutta. The Bench observed that the said agreement did not of itself create any interest or convey any title to the property in favour of Sanchaita Investments but nonetheless, the agreement reciting payment of earnest money created a statutory charge for the earnest money under section 55(6)(b) of the Transfer of Property Act. Since, however, the property still remains the property of the Poddars. It was observed that the Commissioner could not have attached the property itself as has been done. The Poddars did not prefer any formal objection. The objector was the Punjab National Bank and according to the bank. Sanchaita Investments by a subsequent unregistered agreement dated 31.7.82 assigned whatever right, title and interest they had acquired in the property by virtue of the agreement dated 11.5.81 executed by the Poddars in their favour as also the benefit arising out of that earlier agreement concerning such property. The Sanchaita Bench observed : "Indeed, to that extent there has been a technical defect in the attachment made by the Commissioner." But the Bench appears to have taken the view that such a defect could be cured immediately by issuing a fresh attachment in respect of the charge as also the benefit under the agreement which itself constitutes a property and upon consent of the parties, the then Bench proceeded to adjudicate the objection on the basis that what really had been attached is the benefit under the agreement dated 11.5.81.
16. Thus, if we go by the agreement dated 11.9.80, the order of attachment could at best be construed as one whereby the statutory charge to the tune of Rs. 42 lacs and the benefit arising under that agreement were attached.
17. According to the Poddars, the said agreement was not at all subsisting at the time when the attachment was effected and it stood cancelled by a subsequent agreement dated 24.3.81 and superseded by two other agreements dated 24.3.81 and 11.5.81. The Commissioner, on the other hand, banks upon the agreement dated 11.9.80 and it has been contended on his behalf that the agreement dated 24.3.81 purporting to cancel the agreement dated 11.9.80 and the subsequent two agreements dated 24.3.81 and 11.5.81 were all fraudulent, sham and collusive transactions brought into existence by Sanchaita Investments with the object of defrauding the depositors.
18. The reasons for which the genuineness of the two agreements dated 24.3.81 and the one dated 11.5.81 was challenged on behalf of the Commissioner may be set out below.
19. The agreement dated 11.9.90 does not at all entitle the objector to cancel it. There was no cogent ground for cancellation. Time was not of the essence of that agreement and the alleged ground of default in payment of instalments within the time fixed was self-induced and created. There was no dearth of fund of Sanchaita Investments to make the payment of the instalments in terms of the agreement. In the event of default in payment of the instalments, the agreement provided for payment of interst at the rate of 15% per annum for the first three months and. In the event of the period of default exceeding three months, at the rate of 30% per annum. The agreement fixed a total period of 18 months for the completion of the contract and the purported cancellation was made almost within six months of the date of agreement and shortly after the raid was conducted following the FiR against Sanchaita Investments. That there was no dearth of fraud at the material point of time would also be evident from the fact that further payments of Rs. 11.90,000 and Rs. 26.95.000 were made by the Sanchaita Investments to the Poddars. The agreement dated 11.9.80 did not also provide for any right to forfeit the earnest money in favour of the Poddars. The price of the land and the building in the prime locality of Calcutta was escalating day by day and the purported surrender of the right to enforce the agreement by Sanchaita Investments was highly improbable and totally inconsistent with the normal human conduct. The alleged surrender was extremely detrimental to the interest of Sanchaita Investments and there was no earthly reason for them to surrender their valuable right to enforce that agreement. There was no reference to the main agreement dated 11.9.80 or to the factum of alleged cancellation of that agreement in the subsequent agreements dated 24.3.81 and 11.5.81 purporting to be agreements for sale of the first, fourth and fifth floors of the building. The omission to mention that agreement dated 11.9.80 was deliberate and the said agreement was intentionally kept concealed so as to rule out any possible challenge. During the investigation of the criminal case when the Bureau of investigation wanted to know from the Poddars as to the nature and character of the deals which they made with Sanchaita Investments, the Poddars did not at all make any disclosure about the existence of the agreement dated 11.9.80 or its subsequent cancellation by the agreement dated 24.3.81.
20. Thus, the question that would now confront us for a decision would be as to whether the agreement dated 11.9.80 was still subsisting at the time of the impunged attachment or was cancelled and superseded by the agreements dated 24.3.81 and 11.5.81 and whether the said subsequent agreements were sham and not genuine.
21. It is true that the agreement dated 11.9.80 itself does not specifically give right to the Poddars to cancel it. But absence of any recital in the agreement by itself cannot disentitle the party to a contract for sale of immovable property to cancel the contract if cancellation is otherwise permissible under the law of contract. A contract may become voidable by subsequent default of one party as mentioned in sections 39, 53 and 55 of the Indian Contract Act. Even with the assent of both the parties there can be novation, reclssion and alteration of a contract under section 62 of the Indian Contract Act. On the date of execution of the agreement dated 11.9.80. a sum of Rs. 32 lacs was required to be paid and the fact remains that the said sum was paid by the Sanchaita Investments on that very date. The next three instalments of Rs. 32 lacs each were required to be paid respectively after the completion of the foundation, casting of the roof of the ground floor and casting of the roof of the first floor. The series of letters written by the Poddars to the Sanchaita Investments which have been collectively marked Annexure 'I' to the affidavit in support of the objection would go to suggest that on 16.1.81, the Poddars were passing on the information to the effect that the casting of the basement floor was already completed and that work was in progress on the ground floor. The next letter dated 21.1.81 contains an acknowledgement of the payment of a sum of Rs. 10 lacs after the execution of the agreement dated 11.9.80 by Sanchaita Investments as also the demand for a payment of a further sum of Rs. 22 lacs which is said to have already fallen due from Sanchaita Investments on the ground that the casting of the ground floor was then in progress. The next letter purports to have been issued just on the following day. that is 22.1.81. whereby the information was given to the effect that the casting of roof of the ground floor was complete. By this letter, a demand for the third installment of Rs. 32 lacs and a reminder for the outstanding balance of Rs. 22 lacs out of the second instalment were also made. By the next letter dated 28.1.81, demand was being made for payment of the outstanding amounts of Rs. 22 lacs and 32 lacs towards the second and third instalments respectively. By this letter. It was also pointed out that the first floor slab was likely to be completed within 7.2.81 as a result of which the next instalment of Rs.32 lacs would fall due to for payment by that date. By the next letter dated 6.2.81. Information was sought to be given to the effect that the casting of the first floor was complete and demand was being made for payment of the outstanding dues which by that time had fallen into arrear amounting to Rs. 86 lacs. By the next letter dated 2.3.81, payment of the outstanding amount of Rs. 86 lacs was again being demanded. It is true that there is nothing on record to indicate that any of the letters that are said to have been addressed by the Poddars to the Sanchaita Investments between 16.1.81 and 2.3.81 was replied to by Sanchaita Investments. But that itself does not constitute a circumstance sufficient to establish that the contents of all these letters did not represent the real state of affairs and that they were all created only for the purpose of fabricating evidence in support of the alleged default on the part of the Sanchaita Investments to perform its part of the contract by making payments of the instalments as per the time schedule fixed by the agreement dated 11.9.80. These letters can be said to have been fabricated only if it is found that the Poddars were in league and collusion with the Sanchaita Investments in order to defraud the depositors or to safeguard the interest of the partners of the Sanchaita Investments. We have already observed that it is not the case of the Commissioner that the Poddars are. In any way, connected with Sanchaita Investments or its business. There is apparently, thus, no reason for Poddars to collude with Sanchaita Investments for secreting properties of Sanchaita Investments beyond the reach of its depositors. The impugned agreement of cancellation of the agreement dated 11.9.80 is said to have been executed and registered on 24.3.81. It recites the fact that a total sum of Rs. 42 lacs had already been paid by Sanchaita Investments and that the total amount for which the default was already made by Sanchaita Investments in making the payments in terms of the agreement dated 11.9.80 amounted to Rs. 86 lacs. This deed of cancellation does also contain a recital to the effect that the parties have agreed to come to a settlement in order to avoid any dispute and differences by cancelling the agreement dated 11.9.80. It further recites that by way of consideration for this cancellation of the earlier agreement dated 11.9.80. the amount of Rs. 42 lacs which was already paid by Sanchaita Investments would be refundable by the Poddars to Sanchaita Investments and would also be adjustable against the total purchase price of three floors of the building namely the first, fourth and the fifth floors which were agreed by the parties to be sold and purchased by separate agreements. The other agreement dated 24.3.81 and the agreement dated 11.5.81 are said to be those separate agreements by which the Poddars agreed to sell the first, fourth and the fifth floors of the building to Sanchaita Investments. It is true that in the agreement dated 11.9.80 there was no clause for forfeiture of the earnest money. It is also true that time was not really of the essence of that agreement as contemplated under section 55 of the Indian Contract Act. It is also true that in the event of default in payment of the instalments for the first three months the Sanchaita Investments was to pay interest at the rate of 15% per annum and in the event of the period of default exceeding three months the rate of interest would be enhanced from 15% to 30%. It is true that within a few months of the execution of the agreement dated 11.9.80, the raid was conducted in the office of the firm and the residence of its partners. It is also true that on 24.3.81, on which the fresh agreement was executed and registered in respect of the first and fourth floors of the building at a price calculated at the old rate of Rs. 220 per sq. ft.. Sanchaita Investments did make the payment of a sum of Rs. 11,90,000 in cash towards the purchase price for the first and the fourth floors. It is also true that on 11.5.81 the date on which the next agreement was executed and registered for the fifth floor of the building again at the price calculated at the old rate of Rs. 220 per sq. ft.. Sanchaita Investments did make even a further payment of Rs. 26,95,000 and that too in cash, to the Poddars. All these, may, of course, create grave doubts and suspicions. But they cannot take the place of proof. The facts that a sum of Rs. 11.90,000 was paid on 24.3.81 and a further sum of Rs. 26,95.000 was paid on 11.5.81 do not by themselves go to establish the fact that Sanchaita Investments was possessed of funds sufficient to make the payment of the outstanding balance of Rs.74 lacs 10 thousand (86 lacs minus 11 lacs 90 thousand] to keep the agreement dated 11.9.80 subsisting beyond 24.3.81. the date on which the alleged cancellation was made.
it is worthwhile to note here that the total price of the entire building and the land comprised within the concerned premises was settled at rupees three crores twenty lacs in terms of the agreement dated 11.9.80 and the sale was scheduled to be completed within a period of 18 months, and on the date of cancellation of the agreement, only 42 lacs had been paid by Sanchalta Investments reaving a balance of two crores 78 lacs to be paid for acquiring the entire building in terms of the agreement dated 11.9.80. Apart from the question whether Sanchaita Investments had the requisite fund for payment of the said sum of rupees 2 crores 78 lacs within the scheduled period of 18 months from the date of the agreement dated 11.9.80, there was nothing illogical or absurd in substituting the earlier deal for the entire building by a new deal for only three floors of the building (first, fourth and fifth) on payment of a further sum of Rs. 38.85.000 in two instalments of Rs. 11,90.000 on 24.3.81 and Rs. 26,95,000 oh 11.5.81.
22. It was argued on behalf of the Commissioner that had the purported cancellation been genuine and not sham and collusive, attempt should not have been made to keep the factum of such cancellation as much concealed as possible. It is contended that in the agreement dated 24.3.81 in relation to the first and fourth floors of the building and the agreement dated 11.5.81 in relation to the fifth floor of the building, there was absolutely no whisper about the deed of cancellation dated 24.3.81. Our attention has been drawn from the side of the objectors to the fact that in paragraph 4 of the agreement dated 24.3.81 in respect of the first and fourth floors of the building, there is a recital to the effect that a sum of Rs. 42.00.000 was due and payable by the vendor to the purchaser under an agreement of even date made between them and that the said amount would be appropriated towards the purchase price of the concerned two floors (vide annexure 'K'). It will be evident from the reply dated 3.11.82 given by the Poddars to the letter dated 13.10,82 adressed by the Bureau of investigation to the Poddars asking for infomation that along with that reply the aforesaid agreement dated 24.3.81 in respect of the first and fourth floors of the building was also submitted by the Poddars to the Bureau of investigation. A scrutiny of the above recitals in this agreement dated 24.3.81. would have at once brought to the knowledge of the Bureau of investigation of the fact that an agreement of the "even date" (24.3.81) between the parties was in existence under which the sum of Rs. 42 lacs was made refundable and liable to be adjusted against the purchase price of the concerned floors. It is true that the Poddars in their reply dated 3.11.82 did not specifically disclose the facts that there was an agreement between the parties on 11.9.80 and that the said agreement was cancelled by the said agreement of "even date". But a thorough scrutiny of the recitals in paragraph 4 of the agreement dated 24.3.81 would have led to the discovery of the agreement dated 24.3.81 for cancellation of the earlier agreement dated 11.9.80. In the said reply dated 3.11.82. the Poddars also appear to have disclosed the particulars of the payments of Rs. 42 lacs that were made by the Sanchaita Investments to the Poddars prior to the execution of the agreement dated 24.3.81. In the agreement dated 24.3.81 in relation to the first and fourth floors of the building there is recital to show that the first floor was not yet completed and that the fourth floor would be completed within six months. In the last agreement dated 11.5.81 which was executed in relation to the fifth floor, it was also recited that the said floor would be constructed within six months. The Poddars appeared to have disclosed in their reply dated 3.11.82 (vide annexure 'C') the factum of delivery of possession of the first and fourth floors and the fact that they were retaining the possession of the fifth floor. In their subsequent reply dated 22.11.81 (vide annexure 'D') in response to the Bureau of investigation's letter dated 19.11.82 the Poddars appear to have disclosed-the details relating to the delivery of possession in relation to the first and fourth floors. By letter dated 26.9.83 addressed to the Poddars (vide annexure 'E'), the Commissioner. Sanchaita Investments appears to have disclosed the fact that from suit No. 209 of 1982 it had transpired that a sum of Rs. 26.95.000 was lying in their custody as the asset of Sanchaita Investments and that the Commissioner was also attaching the said sum of Rs. 26,95,000 lying in the custody of the Poddars, The said letter appears to have been replied by the Poddars by their letter dated 3.10.83 (vide part of annexure 'E') wherein they have denied the fact that the said amount represented the asset of the Sanchaita Investments and contend inter alia, that it represented the consideration money towards the purchase of the fifth floor of the building in terms of the agreement dated 11.5.81. It would appear from the letter dated 16.6.84 (vide annexure 'F') addressed by the Commissioner, Sanchaita Investments to the Poddars that a joint administrator took possession of the first and the fourth floors some time in April 1983 in connection with a suit being AS No. 245 of 1983. By this letter, the Commissioner did also ask for information about the proprietorship of the second and third floors of the building. The Poddars by their reply dated 30.7.84 (vide part of annexure F) simply stated that the said two floors did not belong to Sanchaita Investments.
23. We have already observed that in the case reported in 89 CWN 509 corresponding to 1985(1) CHN 95, while considering the objection raised by the Punjab National Bank against the attachment made by the Commissioner, Sanchaita Investments, in respect of the fifth floor of the concerned building. In presence of the Commissioner as well as the Poddars, the Sanchaita Bench had occasion to consider the effect of the agreement dated 11.5.81 executed by and between the Poddars and the Sanchaita Investments and also the effect of another unregistered agreement executed on 31st July, 1982, by and between the Sanchaita Investments and the Punjab National Bank, and while doing so, the Sanchaita Bench proceeded to adjudicate the objection raised by the Punjab National Bank on the basis that what really had been attached by the Commissioner was the benefit under the agreement dated 11.5.81. The Bench also held that by reason of the subsequent unregistered agreement dated 31st July, 1982 the Sanchaita Investments were not divested of any right, title and interest in immovable property arising out of the agreement dated 11.5.81 or the benefit thereunder inasmuch as by the said agreement dated 31st July, 1982 no effective assignment could be made in favour of the objector bank. In such view of the matter, the objection of the bank was overruled and the attachment made by the Commissioner was upheld. From the said judgment of the Sanchaita Bench, it would be evident that the Commissioner made the attachment in respect of the fifth floor on the basis of the agreement dated 11.5.81 entered into by and between the Poddars and the Sanchaita Investments. It was accordingly argued on behalf of the Poddars that the Commissioner having already acted upon the agreement dated 11.5.81 cannot now turn around and allege that this agreement was a sham and collusive transaction. After all, this agreement dated 11.5.81 and the agreement dated 11.9.80 cannot co-exist. If the agreement dated 11.9.80 continued to subsist, there could be no occasion or scope for execution of the agreement dated 11.5.81. The agreement dated 11.5.81 flows from the purported cancellation of the agreement dated 11.9.80 and the purported surrender by Sanchaita Investments of their rights and benefits arising out of that agreement dated 11.9.80. In other words, the agreement dated 11.5.81 could be operative only if the purported cancellation by the agreement dated 24.3.81 was valid.
24. It is submitted on behalf of the Commissioner that during the proceeding which culminated in the judgment dated 20.12.84 of the Sanehaita Bench reported in 89 CWN 509. there was absolutely no disclosure from the side of the Poddars about the initial agreement dated 11.9.80 for the sale of the entire building or its cancellation by the agreement dated 24.3.81 as a result of which the Commissioner had had no knowledge of the fact that there was an agreement dated 11.9.80 or for that matter, there was a subsequent agreement for its cancellation. According to the Commissioner, his knowledge about the existence of the agreement dated 11.9.80 and the agreement of cancellation dated 24.3.81 dawned for the first time after he had received a confidential report dated 19.4.89 from one Sibotosh Roy. The said report appears to have been annexed with the affidavit that was affirmed by the Commissioner on 8th August. 1994. In this report, the author who claims himself to be a self styled investigator asserted that the entire building of the premises No. 113, Park Street is owned by Sanchaita Investments and that the transactions to the contrary are all sham and collusive. The fact remains that the first, third and fourth floors of the building covered by the subsequent agreements dated 24.3.81 and 11.5.81 do not form the subject matter of the present attachment and it is not the case of the Commissioner that the remaining floors of the building are in possession of the Sanchaita Investments. If it be a fact that it is only on the basis of the report dated 19.4.89 that the Commissioner's knowledge about the original agreement dated 11.9.80 and its cancellation by the subsequent agreement dated 24.3.81 had dawned for the first time, the Commissioner could not be estopped from characterising the subsequent agreements including the one dated 11.5.81 as sham and collusive transactions. But then. It would have nesessftated a review of the judgment that was rendered by the Sanchaita Bench in the case reported in 89 CWN 509. The Commissioner has not sought for any review of that judgment and any attempt to do so at this stage would have, of course, the effect of unsettling many things which have already settled down. In paragraph 26 of the objection petition, the Poddars have categorically alleged that after the cancellation of the agreement dated 11.9.80 they entered into and/or negotiated and/or dealt with various third parties and had, in fact, sold out to different third parties who have taken possession by purchase thereof by paying considerable amount. It is also the case of the objector that the total amount of Rs. 80.85,000 which they have received from Sanchaita Investments stood adjusted towards the two agreements for sale of the first, fourt and fifth floors of the building in favour of the Sanchaita Investments. The objector appears to have annexed a statement of advances received from assignees as on 31st January, 1986 vide 'M'). Hem No. 71 of that statement would go to corraborate the fact that from Sanchatta Investments they have received a total sum of Rs. 80,85,000. The ledger account in the name of Sanchaita Investments for the years 1980 and 1981, which form part of annexure M, would go to corroborate the fact that out of the said sum of Rs. 80.85.000. the first two instalments of Rs. 32 lacs and 10 lacs were received from Sanchaita Investments by cheques on 11.9.80 and 13.12.80 and that the remaining sum of Rs. 38,85,000 was received by cash in two instalments of Rs. 11.90,000 and Rs. 26.95.000 on 24.3.81 and 11.5.81 respectively. The objector company appears to have annexed with their objection petition as part of the annexure M the audited balance sheet as on 31.12.80 which would lend support to the factum of receipt of a sum of Rs. 42,00.000 from Sanchaita Investments.
25. An argument was advanced on behalf of the Poddars to the effect that the very fact that the agreement dated 11.9.80 and the agreement of its cancellation dated 24.3.81 were registered documents would be sufficient to constitute constructive notice on the part of the Commissioner. Sanchaita Investments of the said instruments with effect from the dates of their registration within the meaning of Explanation 1 of section 3 of the Transfer of Property Act. This argument is not acceptable in view of the fact that the said Explanation would be attracted only when the transaction is required by law to be effected by a registered instrument. It goes without saying that the agreement dated 11.9.80 and the subsequent agreement dated 24.3.81 relating to its cancellation were not at all required to be registered under the provisions of section 17(1) of the Indian Registration Act. That being so, the question of any constructive notice within the meaning of Explanation 1 of section 3 of the Transfer of Property Act, as suggested on behalf of the objector, cannot arise at all.
26. On behalf of the objector, a reference was made to (1993)1 Supreme Court Cases 505, Manick Lal Mukjherjee v. Commissioner of Sanchaita Investments. In that case, the Commissioner, Sanchaita Investments had attached a floor of another premises at 151, Dharmatala Street, Calcutta. An objection was preferred against that attachment by the appellant Manick Lal Mukherjee who agreed to sell the property to Sanchaita Investments by a registered agreement dated 21.6.80. The said agreement was later on cancelled and the agreement became unenforceable. The objection to that attachment was dismissed by the Sanchaita Bench holding that the claim of the objector that their agreement had been cancelled and no right had accrued to Sanchaita Investments could not be accepted. The appellant agreed to sell the property to Sanchaita Investments for a sum of Rs. 16.00,000. On the date of agreement, a sum of Rs. 4,00,000 was paid by the Sanchaita Investments as an earnest money. Subsequently, Sanchaita Investments had paid a further sum of Rs. 9.00.000 before 21.10.80 as provided in the agreement. The balance consideration of Rs. 3,00,000 was agreed to be paid as and when the vendor would be in a position to deliver possession. The agreement further provided that the buyer shall pay the balance and take possession within 15 days of the receipt of the notice received from the vendor that the premises is ready for delivery of possession. The agreement further provided that in the event of the buyer's failure to pay within 15 days of the service of the notice, the sellers shall have the right to refund to the buyer all the payments received except a sum of Rs. 1,50.000 and cancel the agreement and forfeit the sum of Rs. 1,50,000 by way of liquidated damages. By notice the appellants informed the Sanchita Investments that the first floor is ready for delivery of possession and that the buyer could take possession on payment of full consideration. It was the case of the appellants that the Sanchatta Investments failed and neglected to pay the balance amount and take possession and accordingly the agreement became unenforceable and was cancelled. In order to avoid any cloud of title, the appellants also filed a suit on 28.4.81 for a declaration that the agreement became unenforceable and also prayed for cancellation of the same. While the suit was pending, the parties entered into a settlement by which the appellants agreed to return the sum of Rs. 13,00,000 received from the Sanchaita Investments towards the Sale Consideration and also an additional sum of Rs. 50.000 and further agreed to give up their right to forfeit a sum of Rs. 1,50.000 on the default of the buyer to perform their part of contract. In pursuance of the settlement, the appellants issued a cheque for a sum of Rs. 10.00.000 in favour of Sanchaita Investments which was duly encashed. The appellants sent another cheque for Rs. 3,50.000 in favour of Sanchita Investments in full settlement and an additional sum of Rs. 50,00.000 agreed to be paid under the settlement. The Sanchaita Investments informed the appellants that the said cheque was misplaced and on that representation the plaintiff informed their bank about the loss of the cheque and not to honour the same and at the request of Sanchaita Investments they paid a sum of Rs. 3.50,000 in cash. In such circumstances, the appellants filed an application before the Commissioner claiming that the property is not liable for attachment. The High Court rejected the claim on the reasonings that there was no need for the claimants to have abdicated their right to recover or forfeit a sum of Rs. 1,50.000 and that there was no need for paying the additional sum of Rs. 50,000 to the purchaser which means a total financial loss of Rs 2,00.000 to the vendors, and that there was no need for the purchaser to have backed out from the agreement to purchase because the property prices were going up and the vendor would have known that on the date of settlement the property would have fetched much larger money. The endorsement of cancellation in the original agreement to sell was not registered and the settlement had not been recorded in the suit. The apex court disapproved the view of the High Court that since the property prices were going up there was no need for the buyer to have agreed for the settlement and that there was a doubt about the settlement itself. The apex Court observed that the very reason that the property prices were increasing might have induced the vendor to condone the failure of the purchaser to comply with the terms and conditions and be willing to forego his right to forfeit Rs. 1,50,000 and pay an additional sum of Rs. 50,000. The apex Court also observed that there was nothing illogical in this attitude of both the vendor and the purchaser settling the matter and that the High Court proceeded on surmises and suspicion. The apex Court also observed:
"...... the order was to sell the property' in public auction as if it had become the property of Sanchaita Investments without any direction to the appellant to execute a sale deed in favour of the respondent. If the agreement had not fructified into a sale on what basis Sanchaita Investments would have become the owner of the property is not made clear in the judgment."
27. Finally, the apex Court vacated the attachment made by the Commissioner. It is true that the facts and circumstances of the present case are different in many respects from those of the Supreme Court case. But one thing emerges from this judgement that the court should not proceed on mere surmises and suspicions and that if an agreement is not fructified into a sale, the person in whose favour the agreement for sale is made cannot become the owner of the property agreed to be sold without any direction upon the vendor to execute a sale deed in favour of the prospective purchaser.
28. On behalf of the objector, reference was also made to (1990) 3 Supreme Court Cases 726; Paul Brothers v. Asim Kumar Mondal and Ors., wherein it has been held that an attachment cannot affect any interest created in the property prior to the attachment by sale, transfer or alienation. In this case, the Supreme Court was dealing with a Sanchaita case and it was observed :
" The object of the directions given by this court was to cut short the proliferation of litigation and to ensure that the Commissioner is able to gather in expeditiously the assets of Sanchaita which were dissipated or siphoned off by the persons in charge of the firm. Thus, if the firm's moneys had been utilised to purchase properties in the name of various individuals benami such property had to be taken back by the Commissioner from such benamidars. Also, where the said benamidars or other persons put up frivolous claims to the property or its possession without the semblance of any legal title to its ownership or possession, such claims could and should be rejected by the court. But this principle cannot apply to bonafide interests of others in the property."
29. On behalf of the objector, a reference was also made to ; Union of India v. M/s Chaturbhai M. Patel & Co. At paragraph 7 of this judgment the apex court made the following observations which would be very much relevant for the present purpose:
" it is well settled that fraud like any other charge of a criminal offence whether made in civil or criminal proceedings, must be established beyond reasonable doubt......... However suspicious may be the circumstances, however strange the coincidences, and however grave the doubts, suspicion alone can never take the place of proof. In our normal life we are sometimes faced with unexplainable phenomenon and strange coincidences, for, as it is said, truth is stranger than fiction."
30. Having anxious regard to the facts and circumstances in the light of the materials on record, one is bound to have grave suspicion and doubts about the genuineness of the purported cancellation of the agreement dated 11.9.80. One may also have the impression that in view of the lodging in the FIR followed by the raid and police investigation into the affairs of Sanchaita Investments, the partners of the Sanchaita Investments would be interested in secreting its assets and properties out of the reach of its depositors and creditors. But in the absence of any cogent evidence on record, it is difficult to hold that the purported cancellation and its subsequent agreements dt. 24.3.81 and 11.5.81 were sham, collusive and fraudulent as alleged on behalf of the Commissioner. In such view of the matter, the agreement dated 11.9.80 could not be said to be subsisting at the point of time when the impugned attachment was effected by the Commissioner. In view of the above discussions, it would necessarily follow that the objection is liable to be sustained and the impugned attachment vacated. The impugned attachment is accordingly vacated. The matter is thus disposed of without, however, any costs.
Later :
Verbal prayer for stay of this judgement is considered and rejected.
All parties are to act on a signed copy of the operative part of this judgement on the usual undertaking.
Gitesh Ranjan Bhattacharjee, J.
31. I agree
32. Matter disposed of