Calcutta High Court (Appellete Side)
Amar Nath Mitra & Ors vs Arindam Ganguli & Ors on 31 October, 2014
Author: Harish Tandon
Bench: Harish Tandon
In The High Court At Calcutta
Civil Revisional Jurisdiction
Appellate side
Present :
The Hon'ble Justice Harish Tandon.
C.O. No. 2108 of 2009.
Amar Nath Mitra & Ors.
-vs-
Arindam Ganguli & Ors.
For the petitioner : Mr. Arindam Banerjee
Ms. Kum Kum Mukherjee
For the Opposite Party No. 7 : Mr. Sudip Pal Chowdhury
Judgment on : 31.10.2014
HARISH TANDON, J.:
This revisional application is directed against order No. 1 dated. 17th June 2009 passed by learned District Judge, Alipore in Miscellaneous Appeal No. 298/2009 by which an ad interim order of injunction was refused.
The petitioners filed a suit for declaration that they did not authorize the Opposite Party No. 1 to enter into an agreement for sale to encumber four flats as described in the schedule to the plaint and also further declaration that the purported transaction of loan in respect of the aforesaid flats with the bank or any other banks or financial institution is not binding upon them and cannot be enforced and prayed for a decree for permanent injunction restraining the opposite parties from attaching or selling or encumbering and/or adversely affecting the four flats in any manner in relation to any recovery proceeding.
The facts that emerge are that the petitioners being the owner of premises No. 5A, Bakul Bagan Road, Bhawanipur, Kolkata 75 intended to develop the said property and by several correspondences exchanged between the petitioners and the opposite party No. 1 which constituted an agreement, the said property was agreed to be developed by the opposite party No. 1.
One of the salient features of the said transaction is that the opposite party No. 1 would allot the petitioners Nos. 1 to 14 a super built area by 2200 sq. feet free of costs and shall pay a sum of Rs. 2,75,000/- to each of the petitioners Nos. 5 to 8. In order to facilitate the smooth progress of the development work, a power of attorney was executed by the petitioners Nos. 5 to 8 to obtain sanctioned plan and to construct and to look after all the works strictly in terms of the sanctioned plan.
It is alleged that the Opposite Party No. 1 after the completion of the development work, handed over the aforesaid four flats to the petitioners Nos. 1 to 4. It is alleged that some of the opposite parties bank have approached at the said flats and communicated to the petitioners Nos. 1 to 4 that those flats have been kept as a collateral security and/or mortgaged with them by the Opposite Party No.1.
The petitioners have alleged that the opposite party No. 1 had no authority and/or power to put these flats as collateral security or mortgaged with any financial institution including the opposite parties banks and such fraudulent act of the opposite party No. 1 cannot bind the petitioners.
It is further stated that apart from those banks those have been arrayed as the parties in the suit, there may be several undisclosed unknown financial institutions with whom the opposite party No. 1 may have entered into any transaction by which the aforesaid flats are encumbered. A leave under Order 1 Rule 8 of the Code of Civil Procedure is also sought in the plaint.
The trial Court refused to pass an ex parte ad interim order of injunction and issued the notice to show cause upon the opposite parties.
The said order is assailed by the petitioners in an appeal under Order 43 Rule 1 (r) of the Code before the District Judge, Alipore. In the said appeal a fresh application for injunction is filed seeking the similar injunction order. By the impugned order the appellate Court refused to pass an ex parte ad interim order of injunction and further directed the issuance of the notice to show cause upon the opposite parties.
At the time of considering the instant revisional application this Court on 17th September 2009 passed an ad interim order restraining the opposite party from transferring or alienating or creating any third party interest and/or parting with possession of the flats as mentioned in the schedule of the plaint until disposal of this revisional application.
Mr. Arindam Banerjee, learned Advocate appearing for the petitioners submits that the opposite party No. 1 have practiced fraud upon his clients in mortgaging the aforesaid flats and/or putting the same as collateral security against the loan obtained by him without any authority to do so. He further submitted that the opposite parties' banks in collusion with the opposite party No.1have defrauded the petitioners in keeping those properties as mortgaged or collateral security against the alleged loan taken by the opposite No. 1. According to him, the trial Court as well as the first appellate Court should have issued an ex parte ad interim order of injunction when an act of fraud is pleaded in the plaint.
He strenuously submits that the jurisdiction of the civil court is not barred under Section 34 of the Sarfacie Act if fraud is pleaded. In support thereof, he placed reliance upon a judgment of the Apex Court in case of Mardia Chemicals Ltd. Vs. Union of India reported in (2004) 4 SCC 311.
By referring the judgment of the Apex Court delivered in case of Nahar Industrial Enterprises Ltd. Vs. Hong Kong and Shanghai Banking Corpn. reported in (2009) 8 SCC 646, he submits that the Civil Court's jurisdiction is not completely ousted under the recovery of debts due to Banks and Financial Institutions Act, 1993 even if under Section 17 & 18 of the said Act expressly provides the exclusion of jurisdiction.
At the time of entertaining the instant revisional application a point cropped up that in absence of any leave under Order 1 Rule 8 of the Code, the suit can be said to have commenced.
According to Mr. Banerjee although the leave under Order 1 Rule 8 is sought in the plaint as the petitioners are not aware as to the fraudulent act of the opposite parties in keeping those flats being the subject matter of suit to any other financial institutions apart from the opposite parties' banks, the injunction should be restricted to the defendant/opposite party in absence of leave under Order 1 Rule 8.
The opposite No. 7 bank submits that he has entered into the bonafide transaction and cannot be deprived to exercise his statutory right.
Some of the opposite parties banks have already instituted suits for recovery of money where the petitioners have applied for their addition The Court while considering the prayer for exparte ad interim order of injunction should confine to the averments made in the plaint and injunction application as well as the documents annexed thereto. From the averment made in the plaint the specific case of the petitioners is that the opposite party no. 1 have committed fraud upon the petitioners in putting the aforesaid flats in mortgage or collateral security against the loan obtained by him. Although the particulars of fraud has been spelt out in the plaint but nowhere a positive assertion is made that the opposite parties banks are party to the said fraud except a weak statement that the aforesaid banks in collusion with opposite party No. 1 has put the said flats as collateral security/mortgage with them.
The fraud vitiates all solemn act is one of the fundamental principles judicially recognized and applied. It is for such reason a special provision like Order 6 Rule 4 is incorporated in the Code of Civil Procedure which mandates that the parties pleading fraud should state the particulars with the dates and particulars necessary in the pleading.
A fraud, if proved, has a far reaching consequence as it nullifies all the acts done on the teeth thereof. The Court should be very cautions and circumspect to adjudicate an issue where one of the issue is an issue of fraud.
The granting of an injunction is a discretionary relief. The appellate court and also the revisional Court should be slow to interfere with the discretionary order unless the same is found to have been passed beyond the legal principles, irrationally and/or un- judiciously.
In case of Makhan Singh Tarsikka Vs. State of Punjab reported in AIR 1964 SC 381, the constitutional bench was considering the right of the detenus to enforce their fundamental rights under Article 14, 21 & 22 of the Constitution during the period of the president's order issued in exercise of the power conferred under Article 359 of the Constitution. The aforesaid judgment is not pointer to an issue involved in the instant revisional application. The legislative competence to enact the Sarfacie Act is not a subject matter in this revisional application nor the action of the Bank could be said to be an outcome of an abuse of power as tried to be contended by the petitioner.
In case of Mardia Chemicals Ltd (supra), the Supreme Court held that the jurisdiction of the Civil Court cannot be said to have been completely ousted under the provision of Section 34 of the Surface Act; but the Civil Court jurisdiction is retained and can be invoked with certain limitations as an action of the secured creditor if based on fraud.
The similar views are expressed in case of Nahar Industrial Enterprises Ltd (supra) in these words:
"118. The liabilities and rights of the parties have not been created under the Act. Only a new forum has been created. The banks and the financial institutions cannot approach the Tribunal unless the debt has become due. In such a contingency, indisputably a civil suit would lie. There is a possibility that the debtor may file preemptive suits and obtain orders of injunction, but the same alone, in our opinion, by itself cannot be held to be a ground to completely oust the jurisdiction of the civil court in the teeth of Section 9 of the Code. Recourse to the other provisions of the Code will have to be resorted to for redressal of his individual grievances.
142. The principal submission made on behalf of the Bank is that the suit is preemptive in nature. It may be so but then the banks and the financial institutions have their own remedies. As adequate remedy is available to them in law, ordinarily, the same should be directed to be followed. A case of very exceptional nature must be made out for invoking the extraordinary constitutional jurisdiction of a court."
Both the Courts below have found that the ex parte ad interim order cannot be granted and the opposite parties are required to be heard before entertaining the prayer for injunction. The revisional Court should not readily interfere unless it is satisfied that such refusal was illegal, irrational and should not have been passed in the facts of this case.
Before proceeding to deal the point as to whether Order 1 Rule 8 of the Code of Civil Procedure would stand in the way of the petitioner in moving an application for injunction not only against the disclosed defendants but also against the undisclosed defendants who according to the petitioners are numerous, it would be profitable to quote the said provisions which reads thus:
"R.8 One person may sue or defend on behalf of all in same interest.-(1) Where there are numerous persons having the same interest in one suit,-
(a) one or more of such persons may, with the permission of the Court sue or be used, or may defend such suit, on behalf of, or for the benefit of, all persons so interested;
(b) the Court may direct that one or more of such persons may sue or be used, or may defend such suit, on behalf of, or for the benefit of, all persons so interested. (2) The Court shall, in every case where a permission or direction is given under sub-rule (1), at the plaintiff's expense, give notice of the institution of the suit to all persons so interested, either by personal service, or, where by reason of the number of persons or any other cause, such service is not reasonably practicable, by public advertisement, as the Court in each case may direct.
(3) Any person on whose behalf, or for whose benefit, a suit is instituted, or defended, under sub-rule (1), may apply to the Court to be made a party to such suit.
(4) No part of the claim in any such suit shall be abandoned under sub-rule (1), and no such suit shall be withdrawn under sub-rule (3), of rule 1 of Order XXIII, and no agreement, compromise or satisfaction shall be recorded in any such suit under rule 3 of that Order, unless the Court has given, at the plaintiff's expense, notice to all persons so interested in the manner specified in sub-rule (2).
(5) Where any person suing or defending in any such suit does not proceed with due diligence in the suit or defence, the Court may substitute in his place any other person having the same interest in the suit.
(6) A decree passed in a suit under this rule shall be binding on all persons on whose behalf, or for whose benefit, the suit is instituted, or defended as the case may be.
Explanation.- For the purpose of determining whether the persons who sue or are sued, or defend, have the same interest- in one suit, it is not necessary to establish that such persons have the same cause of action as the persons on whose behalf, or for whose benefit, they sue or are sued, or defend the suit, as the case may be."
On reading of the aforesaid provisions, it not only gives option to the plaintiff to sue in representative capacity but if the plaintiff chooses to employ last number of person having a semblance of similar interest then a leave under Order 1 Rule 8 of the CPC is required to be obtained.
The petitioners are not only trying to bind the parties to the suit but also undisclosed and unnamed financial institutions who may have kept those flats as collateral security against the loan given to the opposite party No.1.
The Division Bench of this Court in Case of Calcutta Swimming Club & Anr. -vs- Deokinandan Babna reported in 1993 (1) CLJ 279 held that the leave under Order 1 Rule 8 of the Code if not taken the suit does not commence and therefore, an order of injunction cannot be passed in a stillborn suit in these words:
" 35. We are quite conscious of the position that the provisions of Order I Rule 8 applied only if (I) the parties are numerous, (ii) have the same interest and (iii) the necessary permission of the court is obtained or a direction under Clause B of sub-Rule I is given and notice under sub-Rule (2) is given. The notice is given by the court though at the plaintiff's expense but the provision as to notice is mandatory. The provisions of order I Rule 8 have to be strictly complied with. More so if it is a case of an unregistered society, no one member can sue alone if he has not filed the suit on his own behalf but on behalf of other members. The proper course is to obtain permission before the suit is instituted, but if that is not done, the Rule does not forbid leave being granted afterwards. Permission under this rule may be granted even after the institution of the suit and even at the appellate stage by allowing an amendment, if such amendment does not materially change the nature of the suit. It has been consistently held in various decisions that the rule is mandatory and that failure to comply with its requirement cannot be condoned under Section 99, nevertheless if the suit is laid in the representative character, leave could be granted under this rule even at a later stage, but still then all the formalities prescribed in the Rule should be observed.
36. In (9) Rajendranath v. Royal Calcutta Turf Club reported in 67 CWN 903, however, our High Court held that an amendment by which a suit instituted against an unincorporated and un-registered club is converted into one under Order I Rule 8 of the Code of Civil Procedure cannot be permitted as that would change the character of the suit. However, that decision is not really called into play in the facts and circumstances of the present two cases.
37. We must, therefore, distinguish the present cases from cases instituted in forma pauperies or the suit filed by an indigent person where the suit commenced with the filing of the application in this regard and Court is vested with the jurisdiction to pass appropriate interim order for securing the ends of justice. Here not having been a proper leave taken under Order 1 Rule 8 of the Code of Civil Procedure at the time of passing of the ex parte order of ad interim order or status quo as the case may be no suit commenced and we should vacate those orders under appeal and/or set aside, the impugned orders and direct the Trial Court in each case to proceed in accordance with law after consideration of the prayer under Order I Rule 8 of the Code of Civil Procedure made in each case and then take up the hearing of the injunction matter in all finality where according to our observations made hereinbefore, the Trial Court can minutely scrutinize the contention of the plaintiff in each case about the participation of the defaulting members in the Annual General Meeting and the connected consequent election held thereat and decide the matter in accordance with law."
The leave under Order 1 Rule 8 can be granted at any stage even by an appellate Court. Since I have held earlier that there is no case made out by the petitioners warranting the interference of the revisional Court against an order refusing to pass an ex parte ad interim order of injunction by the appellate Court, I do not propose to decide whether the suit is maintainable in absence of a leave under Order 1 Rule 8 of the code of Civil Procedure or shall be restricted to the parties to the said suit. The appellate Court shall decide the said issue at the time of hearing the application for injunction after receiving the reply to the show cause.
The impugned order does not suffer from illegality and/or infirmity and, therefore, is not interfered with.
The revisional application is thus dismissed. However, there shall be no order as to costs.
Urgent Photostat copy, if applied for, be given to the parties on priority basis.
(Harish Tandon, J.)