Calcutta High Court
Venkateshwar Fiscal Services Private ... vs Bagla And Co. And Ors. on 27 September, 2006
Equivalent citations: 2007(1)CHN80A
Author: Aniruddha Bose
Bench: Aniruddha Bose
JUDGMENT Aniruddha Bose, J.
1. These two Master's Summons have taken out for examination of the applicants being G.A. No. 3129 and T. No. 291, both of 2005 as pro interesse suo and several other reliefs in connection with in an execution case being EC No. 65 of 2005. This execution application has been instituted by Venkateshwar Fiscal Services Pvt. Ltd. ["VFSPL" in short), for enforcement of an award passed against Bagla & Co., a firm and two of its partners. The allegations of the applicants in these two proceedings, being Classic Apartments Pvt. Ltd. and Satyam Shree Projects Pvt. Ltd. are that properties owned by them have been placed under the possession of the Receivers in the execution of an award against the judgement-debtors. The primary reliefs they seek is release of these properties from the execution proceeding and discharge of the Receiver from these properties. The main controversy in the proceeding between VFSPL and Bagla & Co. related to alleged non-payment of certain sum of money by the latter to VFSPL in connection with certain share transactions. The Arbitrator in that proceeding was one Sunil Kumar Goenka, and he passed the award in favour of VFSPL for a sum of Rs. 23,74,520/- (Rupees twenty-three lac seventy-four thousand five hundred twenty only), along with interest @ 18 per cent per annum from the date of transaction/due date till the date of payment, costs of the reference being Rs. 5,500/- (Rupees five thousand five hundred only). The award specified that if there was default in payment of the sum awarded within three months, the claimant would be entitled to take recourse of law for recovery of the amount. From the copy of the award, I find that the respondents i.e. Bagla & Co. and two of its partners had appeared and contested in the arbitration proceeding.
2. This award was put into execution by the VFSPL by instituting the E.C. Case No. 65 of 2005. In column No.9 of the Tabulation sheet of the execution application, which requires specification of the "name of person against who enforcement of the decree is sought," the names of M/s. Bagla & Co., Shri Shree Krishan Bagla and Shri Shravan Kumar Bagla have been indicated, described as respondent Nos. 1, 2 and 3 respectively. In column No. 10 of the same document, in which the applicant is required to describe the mode in which the assistance of the Court is required, the main prayer is for attachment and sale of certain flats which have been described in paragraph 18 and Annexure "D" of the affidavit in support of the Tabular Statement. The specific prayer is for sale of these flats to be effected by the learned Receiver appointed in this matter.
3. The learned Receiver was appointed over these flats in course of a proceeding under Section 9 of the Arbitration and Conciliation Act, 1996 (the "Act" in short) by the Hon'ble Arbitration Court. The initial direction was for taking symbolic possession, but subsequently the Hon'ble Arbitration Court had directed the learned Receiver to take physical possession, and physical possession of these flats were taken on 26th July, 2005. It appears that subsequent to the filing of the execution application, this Court had passed several directions and the learned Receiver continued to be in possession of the flats, as a Receiver of the Executing Court, (being the Interlocutory Court, exercising jurisdiction over execution proceeding). At that point of time, the claim of Classic Apartments Private Limited was that the flat was in their possession, but under lock and key. The case of Satyam Shree Projects Limited is that they obtained possession of the flat on 22nd June, 2002, and arrangement with one ITC Ltd. was being worked out for a leave and license agreement. It is alleged that physical possession of this flat was given to ITC Ltd. on 15th July, 2005.
4. The learned Receiver at present is in possession of two flats, in premises No. 11/3L and 11/3M of Old Ballygunge Second Lane, Kolkata 700 019. In the Master's Summons taken out in respect of G.A. No. 3129 of 2005, the applicant Classic Apartments Private Limited claims to be the owner of the flat in premises No.ll/3M. The Master's Summons in respect of T. No. 291 of 2005 has been taken out by Satyam Shree Projects Private Limited, and they claim to be the owner of a 2nd Floor flat in premises No. 11/3L. Both these matters were heard simultaneously, as identical points of law and near identical factual questions are involved in the present proceedings.
5. Mr. Anindya Kumar Mitra, learned Senior Advocate appearing for the applicant Classic Apartments Pvt. Ltd. (in G.A. No. 3129 of 2005), submitted that the initial order of this Court directing the learned Receiver to take physical possession of the property in question was without jurisdiction. His case is that the flat in question has been obtained by the applicant on 4th January, 2005 under a registered deed of conveyance, a copy of which was produced before me. An inspection was also taken of the copy of the said deed of conveyance by the learned Advocate appearing for the VFSPL though this deed or any copy thereof was not disclosed by the applicants in any of their pleadings. His argument is that this fact conclusively establishes the right, title and interest of his client over the flat in question. On this basis he prays for discharge of the Receiver from the flat in question and release of the flat from the purview of the execution proceeding. The contention of Mr. Mitra is that it is for the person claiming attachment and sale of a property to establish that the property belongs to the judgement-debtor or over which he has power of disposal, and he has drawn my attention to Section 60 and Rule 30 of Order 21 of the Code of Civil Procedure ("the Code" in short). In the present case, he argues, that no case has been made out in the pleadings that the property in question belonged to the judgement-debtors or that they had power of disposal over the profits thereof. Mr. Mitra also argued that the order directing the learned Receiver to take possession was contrary to the provisions of Sub-rule (2) of Order 40, as VFSPL had no subsisting right to remove the applicants from the flats in question. Relying on two decisions being Bacha F. Gauzdar v. Commissioner of Income Tax and Heyderabad (Sind) Electric Supply Co. Ltd. v. Union of India , he contended that for personal liability of shareholders, the company's assets cannot be attached.
6. Mr. Pratap Chatterjee, learned senior Advocate appeared for Satyam Shree Projects Private Limited being the applicant in T. No. 291 of 2005. He adopted arguments of Mr. Mitra and his submission is that it is for the petitioner in an execution proceeding to demonstrate as to how the property can be brought within the purview of the execution proceeding. His case is that VFSPL has failed to satisfy that the flats in question belong to the judgement-debtors. Accordingly, he submits that his clients are entitled to the reliefs claimed in the Master's Summons. He has relied on the following authorities in support of his submissions that Court can direct release of the properties at the instance of a stranger in similar situation.
(1) An unreported decision of this Court dated 23rd March, 2006 in G.A. No. 3559 of 2003 arising out of E.C. No. 11 of 2003 in the case of Hukum Raj Sajjan Raj Kumbat v. El Dorado Guarantee Ltd.
(2) N.C. Garai v. Matri Bhandar reported in 78 CWN 555.
(3) Sarladevi v. Shailesh .
7. Mr. P.C. Sen, learned Senior Advocate appearing for VFSPL being the award holder has resisted the prayer of the applicants. His main case is that the dispute between the parties, which involve decision on title cannot be decided in a summary proceeding in an application taken out for being examined as pro interesse suo. The two applicants must come and establish paramount'title over the flats in question, before they gain entry into the present proceeding.
8. On the scope of an application for being examined as pro interesse suo, he has relied in three decisions of this Court, and submitted that no order could be passed in support of the applicants in a summary proceeding. These authorities are:
(i) Sreedhar v. Nilmoni .
(ii) Bajranglal Khemka v. Sheila Devi 74 CWN 444.
(iii) Central Bank of India v. S.C. Guha .
9. The second limb of his submission, which also is on procedure, is that to sustain as application for being examined pro interesse suo, the applicant must show diligence. He contended that there was substantial delay in instituting the present proceedings, as the applicants were all along aware of the present proceeding, and in particular the order the Hon'ble Arbitration Judge passed on 15th October, 2004, by which the judgement-debtors were restrained from dealing with and/or disposing of and/or encumbering the properties in question. In respect of G.A. No. 3129 of 2005, the Master's summons was taken out on 23rd September, 2005, whereas in respect of T. No. 291 of 2005, the date is 1st August, 2005.
10. On facts, VFSPL's case is that the flats in question belonged to the members of the Bagla family or companies under their control.
11. The other limb of submission of Mr. Sen is that in the pleadings, no document establishing title of the applicants in respect of the flats in question was produced or disclosed. Relying on a decision of the Hon'ble Supreme Court in the case of Kudan Lal v. Custodian Evacuee Property AIR 1961 SC 1317, he argued that since the applicants were in possession of the best evidence to sustain their claim over ownership of the flats in question, and they had withheld it, adverse presumption should be drawn against the applicants, so far their claim of title over the flats are concerned. This argument was advanced on the basis of the pleadings.
12. Referring to the deed of conveyance, which was disclosed by the applicants in course of hearing, and inspection thereof was taken by the learned Advocate-on-Record of VFSPL, his case was that at best, the deed in question gave the applicants right to construct and conferred on them right on undivided share in the land. Moreover, the said deed did not disclose any memorandum of consideration, and non-passing of consideration was a strong evidence that the transaction being sought to be given effect to by the deed, was a sham transaction. The deed of conveyance dated 4th January, 2005 could not be held to be a legitimate one, since the flats were in existence prior to January, 2005. As regards the authorities relied upon by Mr. Chatterjee, the decision of case of N.C. Garai (supra), Mr. Sen submitted, supports his contention that onus lies on the party who applies to the Court for examination of his title to establish his case first. The case of Sarladevi (supra), was distinguishable as there was clear evidence as regards possession of the plaintiff in respect of the property in question. Dealing with the unreported decision of this Court in the case of Hukumraj Sajjanraj Kumbat (supra), it was contended that this decision went contrary to different decisions of this Court and the Hon'ble Supreme Court. These broadly are the submissions of the respective parties.
13. Learned Advocate for the judgement-debtors appeared in this matter, but no affidavit was filed by them.
14. I propose to deal first on the scope of a pro interesse suo application. The issue on this point, which falls for determination is as to whether entire onus rests on the applicants in such an application to establish their title or if they succeed in establishing that the award holder had failed to, demonstrate that the properties in question did not belong to the judgement-debtors, of if the latter did not have the power of disposal of the property, that would be sufficient for being entitled to the reliefs prayed for in these applications.
15. In case of Sreedhar v. Nilmoni (supra), the applicant himself had earlier filed a suit to try the question of title. In this case, the scope or nature of an application for being examined pro interesse suo was discussed, and it was observed:
The practice in England is to allow the applicant to go before the Master and to state his title upon which he may in the first instance have the Judgment of the Master and ultimately, if necessary, that of the Court, but where the question to be tried is a pure matter of title, the Court from a sense of convenience and justice will generally authorise a suit to be brought taking care, however, to protect the possession by giving proper directions.
16. In the case of Bajranglal Khemka (supra), the property in question was under joint administrators appointed under the Indian Succession Act, and in paragraph 15 of this judgement, the locus of an applicant for being examined as pro interesse suo has been considered. In this case, it was held:
The significant difference between the position of a Receiver or a sequestrator on the one hand and that of a general administrator of a deceased on the other, is that while the estate of the deceased vests in the general administrator, no property vests in a Receiver or a sequestrator. Where a stranger to the action is aggrieved by any act or conduct on the part of the Receiver, the Court proceeds to examine the petitioner pro interesse suo with regard to his claim, because the Court be made a suitor in proceedings in any other Court. On the other hand the property of a deceased vests in the general administrator, and a stranger to the action aggrieved by his conduct by reason of his interference with title to or possession of property has a right to obtain redress in an action at law. In that view of the matter in our opinion an application for examination of the petitioner pro interesse suo is not maintainable against an administrator pendente lite for any injury caused by him to the title to or possession of property of a stranger to the proceedings.
17. In the case of Central Bank of India (supra), it has been held:
A proceeding in pro interesse suo is not provided for either in the Code of Civil Procedure or in the Rules of the Original Side of this Court. This is a procedure imported into this country from England. In order to do justice to a person, the Court allows that person to come in and be examiend as to his title to the goods or property over which the Court has appointed Receiver in a proceeding between persons other than the said person. That is done so that no person may suffer because of any order that may be passed by the Court. It is the right in such a proceeding of that person who claims to be the owner of the goods or property too be examined as to his title to the said goods or property. It is in that sence a personal right of that persons only. That person cannot in my opinion in such a proceeding ask the Court to examine some other person with regard to that person's right or title in the goods or property over which the Court has appointed a Receiver.
18. The proposition of law, which was sought to be established by the award holder relying on these three authorities was that in an application for being examined as a pro interesse suo, the applicant must satisfy the Court as to his title to the property, before he can be allowed to question the authority of another party to the suit to have a Receiver appointed over that property. But this does not appear to be the absolute proposition of law. In the case of N.C. Garai (supra), in which all these authorities were considered, this Court opined:
While normally the Court does not grant any relief at the instance of a stranger to the suit the Court may, however, in an appropriate case give relief to a stranger by dissolving an order of injunction....
19. In the case of Hukumraj Sajjan Kumar Kumbat (supra), where the factual background was similar, an Hon'ble Single Judge of this Court held:
In application of this nature, I think I need not examine the right, title and interest of the applicants. I am not determining their right, title and interest. The only question is as to whether the property in question can be brought in the execution application to satisfy the decree or not? Mr. Bachawat's clients have not been able to produce any document showing that El Dorado Guarantee Limited was or is any point of time the owner of the property. Admittedly, the applicants are not the judgement-debtors. As such, I am of the view that these five flats cannot be kept within the purview of the execution application. Accordingly, I release this property from the purview of execution application and I discharge the Receiver accordingly.
20. In the case, however, certain consequential directions were given for preservation of the properties for a limited period, after this order was passed.
21. The authorities are uniform so far as maintainability of pro interesse suo application in a case of this nature. The only question arises at this stage is whether before giving the applicants entry to the proceeding, I ought to require them to establish their paramount title on the subject flats first, or at their invitation, upon considering the pleadings, I can test the award holder's claim over these flats.
22. On this point, I am of the view that I should not adopt a strict approach, as being laid down in the cases of Sreedhar (supra), Bajranglal Khemka (supra) or Central Bank (supra), but take a more liberal approach, for which also there are precedents, at least so far permissibility of taking such liberal approach in law. [N.C. Garai (supra) and Hukumraj Sajjan Kumbat (supra)]. The decision of the Hon'ble High Court of Bombay in the case of Sarladevi (supra), however, in my opinion, does not apply in the facts of the present case.
23. The reason why I chose to take such an approach is this. Though the attachment of these two flats were applied for by the award holder, there is no pleading to the effect that the judgement-debtors are owners of these flats. In paragraph 7 of the affidavit in support of the Tabular Statement, affirmed by one Sanjay Gupta, the ownership status of these flats have been disclosed as:
Thereafter, the claimant duly replied to the said letter and by their letter dated lat September, 2004 refused to agree to their proposal for easy instalments and also got recorded that the respondents earlier represented that they will sell their flats at premises Nos. 11/3L & 11/3M, Old Ballygunge Second Lane, Kolkata 700 019 which stands in the name of M/s Classic Apartment Pvt. Ltd., Satyam Shree Projects Pvt. Ltd. and Sumangal Apartment & Finance Pvt. Ltd. and are controlled by the respondents and/or their, relatives including Bharat Kumar Bagla, Ram Kumar Bagla and Sidhartha Kumar Bagla the sons and brothers of the respondent Nos. 2 and 3 respectively. The particulars of the said property are fully mentioned in the Schedule annexed hereto and marked with letter "D".
24. The award-holders case as made out in respect of these two flats, thus, at the highest is that the owners of these flats are the members of the Bagla family and/or companies controlled by them. There is also admission that the flats in question are standing in the names of the present applicants, and it has been contended, without furnishing any material particulars, that the two applicants are controlled by the judgement-debtors and/or their relatives. Even in their pleadings in the present two applications, they have not come out with a clear case that the judgement-debtors or any one of them have title to these properties. The judgement-debtors also have not come out any cogent case of their rights over the flats in question. The applicants, on the other hand, at least have come forward with a document of title in the form of the deed of conveyance. In the light of these facts, I do not think it is necessary to examine the award-holders defence in the light of the ratios of the decisions of the Hon'ble Supreme Court in the case of Bacha F. Gauzdar (supra), and the decision of the Hon'ble High Court of Punjab in the case of Hyderabad (Sind) Electric Supply Co. Ltd. (supra).
25. The provision of the Code is fairly clear that for attachment and sale of property in respect in respect of a decree (which is money decree in the present case), the same must belong to the judgement-debtors or they must have disposing power over such property. Now, the applicants before me are two incorporated companies, being independent juridical persons, and no case has been made out for lifting the corporate veil on the allegation that they are controlled by the judgement-debtors themselves. Mere suggestion that these flats belong to Bagla family or companies controlled by them, in my opinion would not be sufficient to bring these flats within the purview of the execution proceeding initiated by the award-holder.
26. In the light of these facts, where the award-holders themselves have failed to make out a case that the property in question is that of the judgement-debtors, or can otherwise be brought within the ambit of the execution proceedings. In my opinion, it would not be in the interest of justice to require the applicants to establish their claim of title over these flats. In such a situation, once these facts are brought to the notice of the Court, whatever by the form of the application, the properties over which Receiver has been appointed ought to be released. I am also of the opinion that as VFSPL has failed to establish any title or right of Bagla & Co. or its partners on the subject-flats continuing with the learned Receiver on the subject flat would be contrary to the provisions of Sub-rule (2) of Order 40.
27. Though the practice of filing of an application for being examined as pro interesse suo has been adopted by this Court exercising its ordinary original civil jurisdiction from the english legal system, the practise, as prevailing in its country of origin has not been strictly followed. A party seeking entry into a litigation it does not appear, was first required to satisfy the Master about its title over the property first. A person having interest in a property which is subject-matter of proceeding between or amongst other parties can come to this Court straightaway with such an application. This is the procedure which the applicants have opted for in the present case.
28. Once they have come before this Court, in my opinion, they ought not to be required to establish their paramount title in the property first, before they can argue on the lacuna in the award-holders' claim on these flats. This is not a case where they are claiming title on a property over which there are conflicting claims in a suit, as in the case of Sreedhar (supra). In the case of Bajranglal Khemka (supra), an Hon'ble Division Bench of this Court came to a finding having regard to the nature of the dispute, the various questions raised on behalf of the parties could not be answered on the basis of documentary evidence produced in connection with that proceeding. The applicants' prayer for being examined pro interesse suo was rejected in the case of Central Bank (supra) as the goods on which the applicants were claiming title stood already delivered to one of the parties on furnishing of bank guarantee by an order passed in that suit earlier.
29. Under such circumstances, in my opinion, the strict practise of proving the title in a pro interesse suo application in the present case cannot be imposed on the applicants. If from the pleadings filed in connection with such application it is established that the award-holders themselves have failed to make out a case from bringing certain property within the purview of the execution proceeding, then a Court of Law can release such property without requiring the applicants to establish their title first. The Court is such a case shall take notice of the nature of claim of the award-holders (or decree-holders) over the properties, and if such claim falls short of the standard postulated in Section 60 read with Rule 30 of Order 21, then the properties ought to be released from the execution proceedings.
30. Argument of Mr. Sen based on the decision of the Hon'ble Supreme Court in the case of Kundan Lal (supra) largely loses its strength as the deed of conveyance was produced in course of hearing, and inspection of the same was taken by the learned Advocate of the award-holder. As I have already observed this deed of conveyance per se establishes at least certain degree of interest or title of the applicants in respect of the subject-flats, and for the reasons indicated above, I do not consider it necessary to further examine the quality of such title or interest. On the point of lack of diligence of the applicants in approaching this Court, the admitted position is the actual physical possession of these flats were taken on 26"1 July, 2005. The delay in taking out the present applications, in the months of August and September of the same year in my opinion cannot be held to be fatal.
31. There has been allegations of collusion with Bagla & Co. and its partners, by the award-holder, with the applicants, and by the applicants, with the award-holder. But no particulars of such collusion has been given. Arguments on this count, of both the contesting parties, in my view, cannot be accepted.
32. A point was also taken in the application in support of the Master's summon in G.A. No. 3129 of 2006 that the subject property being outside the ordinary original civil jurisdiction of this Court, cannot be brought under a Receiver appointed by this Court. But no argument was advanced on this aspect.
33. A technical point was also raised that a notice of motion ought to have been taken out in these two matters, and these applications could not be initiated by Master's summons but again practically no argument was advanced on this count in course of hearing. Per se, the applications taken out in their present form appears to be valid, and I do not consider to delve further into this issue as well.
34. The applications, being G.A. No. 3129 of 2005 and T. No. 291 of 2005 are accordingly allowed. I discharge the Receiver over the flats forming subject-matter of these two proceedings and dissolve all injunctions imposed on such properties.
35. I place on record deep appreciation for the valuable assistance given to this Court in this matter, on my request, by Mr. P.K. Das and Mr. S.D. Banerjee, both learned senior Advocates of this Court.
36. There shall, however, be no order as to costs. Later:
37. Let an urgent xerox certified copy of this order be supplied to the parties, if applied for.
38. Learned Advocates for the award-holders pray for stay of operation of this order. Having regard to the fact that these properties are in possession of the learned Receiver since 26th July, 2005 and because of the ensuing vacation, the operation of this order shall remain stayed for a period of five weeks.