Delhi High Court
Sita Chaudhry vs Verinder Singh & Ors. on 29 July, 2022
Author: Amit Bansal
Bench: Amit Bansal
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Reserved on : 25th May, 2022
Judgment Delivered on : 29th July, 2022
+ CS(OS) 589/2021 & I.A. 15854/2021 (O-VII R-14(3) CPC),
I.A. 17537/2021 (u/S 151 CPC), I.A. 336/2022 (O-XXXIX R-
2A CPC), I.A. 337/2022 (for exemption)
SITA CHAUDHRY ..... Plaintiff
Through: Mr.Saurabh Kirpal, Senior Advocate
with Mr.Anunaya Mehta and
Mr. Vinayak Thakur, Advocates
versus
VERINDER SINGH & ORS. ..... Defendants
Through: Mr.Jayant K.Mehta, Senior Advocate
with Mr.Rishabh Kapur, Advocate for
D-1
Ms.Suveni Bhagat, counsel for D-2
Mr.Aman S.Bakhshi, counsel for D-3,
D-7 & D-8
Mr.Sandeep Sethi, Senior Advocate
with Mr.Akhil Sachar, Ms.Sunanda
Tulsyan and Mr.Sangram Singh,
Advocates for D-4 & D-9
Mr.Abhinav Vasisht, Sr.Advocate
with Mr.Nikhil Singhvi, Mr.Mohit
Seth and Mr.Shikhar Garg, Advocates
for D-13
Ms.Mayanka Dhawan, Advocate for
D-15
Ms.Fareha Ahmad Khan and
Ms.Shagun Chopra, Advocates for D-
17
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CORAM:
HON'BLE MR. JUSTICE AMIT BANSAL
JUDGMENT
AMIT BANSAL, J.
I.A. 14829/2021(O-XXXIX R-1 & 2 of CPC), I.A. 15075/2021(of the defendant no.16 u/O-XXXIX R-4 of CPC), I.A. 15080/2021 (of the defendant no.13 u/O-XXXIX R-4 of CPC), I.A. 15081/2021(of the defendant no.4 u/O-XXXIX R-4 of CPC)
1. By way of the present judgment, I shall dispose of the application filed on behalf of the plaintiff under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908 (CPC) and the applications filed on behalf of the defendants no. 4, 13 and 16 respectively under Order XXXIX Rule 4 of the CPC seeking vacation of the ex parte ad interim injunction granted vide order dated 12th November, 2021 passed by this Court. PROCEEDINGS IN THE SUIT
2. The present suit has been filed for declaration, permanent and mandatory injunction, rendition of account and cancellation in respect of the shares and interest owned by late Sh. Devinder Singh Chaudhry and the plaintiff in the various defendant companies/Limited Liability Partnerships (LLPs).
3. This Court, vide an ex parte ad interim order dated 12th November, 2021 had directed that status quo be maintained qua disposing of properties as described in Schedule A to the plaint, on the basis of shares earlier held by the plaintiff and her husband, late Sh. Devinder Singh Chaudhry, that were transferred to the defendants no.4 and 9.
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4. Thereafter, submissions in the captioned applications were heard on 28th January, 2022, 14th February, 2022, 23rd February, 2022, 14th March, 2022, 25th March, 2022, 05th April, 2022, 28th April, 2022, 06th May, 2022, 11th May, 2022 and 25th May, 2022. Both sides have also handed over voluminous compilations of documents/judgments.
PLEADINGS IN THE PLAINT
5. It has been pleaded in the plaint that:
(i) The plaintiff was married to late Sh. Devinder Singh Chaudhry. They had three sons, namely Verinder Singh (defendant no.1), Deepinder Singh (defendant no.2) and Bhupen Phougaat (defendant no.3).
Sunaina Singh (defendant no.4), Shruti Manav Sharma (defendant no.5) and Karandeep Singh (defendant no.6) are the children of the defendant no. 2. Arjun Singh (defendant no.11) and Ankur Singh (defendant no.12) are the children of the defendant no.1. Brahm Dev Phougaat (defendant no.7) and Kritika Phougaat (defendant no.8) are the children of the defendant no.3. Ajay Kadyan (defendant no.9) is the husband of the defendant no.4.
(ii) The defendants no.13, 15, and 16 are the companies incorporated by the late Sh. Devinder Singh Chaudhry, the defendants no.14 and 17 are LLPs set up by the late Sh. Devinder Singh Chaudhry, and the defendant no.19 is a company incorporated by the defendants no.4 and 9. Defendant no.18 is the depositary of shares, which transferred the shares of Industrial Cables (India) Ltd. (defendant no.13 company) in favour of the defendants no.4 and 9.
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(iii) Late Sh. Devinder Singh Chaudhry and his wife, the plaintiff set up
various companies/LLPs, including the defendants no. 13 to 17, which were closely held by them. Late Sh. Devinder Singh Chaudhry and the plaintiff were the directors/partners in the said companies/LLPs and held majority shareholding/interest, either directly or indirectly. All the aforesaid companies/LLPs held various properties, as described in the Schedule annexed to the plaint. The majority of the properties were held by the defendant no.13 company.
(iv) Sh. Devinder Singh Chaudhry passed away on 5th December, 2009 leaving behind his wife and other legal heirs. At the time of his death, almost the entire shareholding in the various companies including the defendant no.13 company were in the name of late Sh. Devinder Singh Chaudhry and the plaintiff.
(v) The shareholding pattern in the defendants no.13 to 17 at the time of death of late Sh. Devinder Singh Chaudhry was as follows:
Table I S. NO. NAME OF ENTITY SHAREHOLDING
1. Industrial Cable Ltd. a. Devinder Singh 21,50,410 25.7% (Defendant no.13) Chaudhry b. Sita Chaudhry 7,51,000 9.0% c. Ruchi Towers 41,53,150 49.6% d. Darshan 6,49,000 7.8% Properties Pvt.
Ltd.
e. Others 6,61,900 7.9%
Total 83,65,460 100%
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2. Ruchi Towers Pvt. Ltd. a. Devinder Singh 88,119 40.6%
(now Ruchi Towers LLP) Chaudhry
(Defendant no.14)
b. Sita Chaudhry 46,463 21.4%
c. BBI Pvt Trust 82,424 38.0%
Total 2,17,006 100%
3. P.E. Manning a. Devinder Singh 15,000 50.0%
(Consultants) Pvt. Ltd. Chaudhry
(Defendant no.15)
b. Sita Chaudhry 3,012 10.0%
c. Satluj Pvt Trust 12,000 40.0%
Total 30,012 100%
4. Amba Promoters & a. Devinder Singh 5,000 50.0%
Developers Pvt. Ltd. Chaudhry
(Defendant no.16)
b. Sita Chaudhry 1,000 10.0%
c. Satluj Pvt. Trust 4,000 40.0%
Total 10,000 100%
5. Rama Packing & Wires a. Devinder Singh 470 5.5%
Industries Pvt. Ltd. (Now Chaudhry
Rama Packing & Wires
Industries LLP)
(Defendant no.17)
b. Sita Chaudhry 443 5.2%
c. ICL Sales & 3,800 44.6%
Services Pvt Ltd
d. Deepak Oils Pvt 3,800 44.6%
Ltd
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Total 8,513 100%
6. Deepak Oils Pvt Ltd a. Devinder Singh 2,000 20.0%
(now amalgamated with Chaudhry
Defendant no.17)
b. Sita Chaudhry 2,000 20.0%
c. RPW Pvt Trust 6,000 20.0%
Total 10,00 60%
7. ICL Sales & Services a. Devinder Singh 10,000 20.0%
Pvt. Ltd. (now Chaudhry
amalgamated with
Defendant no.17)
b. Sita Chaudhry 10,000 20.0%
c. RPW Pvt Trust 30,000 60.0%
Total 50,000 100%
(vi) Late Sh. Devinder Singh Chaudhry executed a Will dated 26th March,
2004, which was his last and final will.
(vii) On 14th January, 2019, the defendant no.2 sought probate/letters of administration of another Will dated 4th October, 2008 of late Sh. Devinder Singh Chaudhry before the Additional District Judge, South District, Saket District Courts, New Delhi. The plaintiff filed objections in respect of the aforesaid proceedings.
(viii) After the death of late Sh. Devinder Singh Chaudhry, the plaintiff, being about 73 years of age, was not in the best of health conditions and felt alone and vulnerable. The defendant no.4, being her granddaughter, sensing an opportunity to usurp the family estate, CS(OS) 589/2021 SignaturePage Not Verified 6 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 persuaded the plaintiff to allow her and her husband, the defendant no.9 to move to Chandigarh and reside with the plaintiff.
(ix) Taking advantage of the old age/physical health of the plaintiff, the defendants no.4 and 9 illegally, fraudulently and clandestinely transferred in their names the shareholding/interest of late Sh. Devinder Singh Chaudhary and the plaintiff in the defendant companies/LLPs. Details of the transfers made in the group companies/LLPs after the demise of late Sh. Devinder Singh Chaudhry are given in the table below:
Table II NUMBER DATE CORPORATE TRANSFEROR TRANSFEREE OF ENTITY SHARES 19.12.2018 Amba Promoters Sita Sunaina 6,000 & Developers Chaudhry Singh Pvt Ltd (Defendant no.
16) 19.12.2018 P.E. Manning Sita Sunaina 18,012 (Consultants) Chaudhry Singh Pvt. Ltd (Defendant no.
15)
14.03.2019 Ruchi Towers Sita Sunaina 62% LLP
LLP (Defendant Chaudhry Singh Capital
no. 14)
14.03.2019 Rama Packing & Sita Sunaina 47% LLP
Wires Industries
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LLP (Defendant Chaudhry Singh Capital
no. 17)
24.04.2019 Ruchi Towers Rajpura Steel Ajay Kadyan 38% LLP
LLP (Defendant Tubes Pvt. Capital
no. 14) Ltd.
06.06.2019 Industrial Cables Sita Sunaina 21,21,240
(India) Ltd Chaudhry Singh
(Defendant no.
13)
(x) Based on the aforesaid transfers, the defendants no.4 and 9 took over
the management of the various companies/LLPs and appointed themselves and their close aides as the directors/partners. The current shareholding/ownership and directorship/partnership of the various companies/LLPs are given in the table below:
Table III NAME OF BODY SHAREHOLDING/ DIRECTORSHIP/ S. NO. PARTNERSHIP CAPITAL PARTNERSHIP CORPORATE
1. Industrial a. Sunaina Singh 1. Sita Chaudhry Cables Ltd. 33.6% (Managing Director) b. Sita Chaudhry 0.01% 2. Sunaina Singh (Wholetime c. Devinder Singh Director) Chaudhry 8.6% 3. Rajeev Pandey d. Ruchi Towers (Director) LLP 44.1% 4. Puja Shukla CS(OS) 589/2021 SignaturePage Not Verified 8 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 (Company e. Darshan Properties Secretary) LLP 6.9% f. Others 6.8% 100%
2. Ruchi Towers a. Sunaina Singh 1. Sunaina Singh LLP 62.0%
2. Ajay Kadyan b. Ajay Kadyan (Designated 38.0% Partners) 100%
3. P.E. Manning a. Sunaina Singh 1. Sita Chaudhry (Consultants) 60.0% Pvt. Ltd. 2. Sunaina Singh b. Rama Packing & Wire Industries LLP 3. Ajay Kadyan 40.0% (Directors) 100%
4. Amba a. Sunaina Singh 1. Sita Chaudhry Promoters & 60.0% Developers 2. Anil Kumar Pvt. Ltd. b. Rama Packing & Rampal Wire Industries LLP (Directors) 40.0% 100%
5. Rama Packing a. Sunaina Singh 1. Sunaina Singh Wires 47.5% (Designated Industries Partner) CS(OS) 589/2021 SignaturePage Not Verified 9 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 LLP b. Ruchi Towers LLP (Defendant 52.5% 2. Rajeev No. 17) Pandey (Body 100% Corporate Designated Partner Nominee)
(xi) After taking control of the aforesaid companies/LLPs, the defendants no.4 and 9 began to sell the various properties held by the aforesaid companies/LLPs at prices much lower than the prevailing market price.
(xii) The defendants no.4 and 9 have disposed of 22.75 acres of land situated in Village Kheri Sadh, District Rohtak, Haryana, which belonged to the defendant no. 16 company, by selling the same to third parties. In this regard, reference has been made to the following sale deeds:
a. Sale Deed dated 09th January, 2019 for a consideration of Rs.3,07,12,500/-
b. Sale Deed dated 12th January, 2019 for a consideration of Rs.3,89,25,000/-
c. Sale Deed dated 23rd January, 2019 for a consideration of Rs.1,50,75,000/-
d. Sale Deed dated 23rd January, 2019 for a consideration of Rs.97,87,500/-.
(xiii) The defendants no.4 and 9 have also disposed of the farmhouse located at 'The Green' in Village Rajokri, Tehsil Vasant Vihar, New CS(OS) 589/2021 SignaturePage Not Verified 10 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 Delhi-110038 admeasuring 6 bighas, 1 biswa in Khasra Nos. 217 and 212/2, which was owned by late Sh. Devinder Singh Chaudhary.
(xiv) The defendants no. 4 and 9 have acquired the following properties held in the name of the defendant no.13 company and other defendant companies/LLPs after assuming control of the said defendant companies/LLPs on account of their shareholding:
Table IV VALUE S. NO. PROPERTIES (APPROXIMATELY)
1. 35 acres of land at Town No. 1, Rajpura Rs.125 crores Township, Rajpura, Patiala, Punjab held by Industrial Cables (India) Ltd. (Defendant No. 13)
2. 15.74 acres of land at Industrial Area, Rs.60 crores Rajpura, Patiala, Punjab held by Industrial Cables (India) Ltd. (Defendant No. 13)
3. 5.99 acres of land, Industrial Area, Rajpura, Rs.30 crores Punjab held by Industrial Cables (India) Ltd. (Defendant No. 13)
4. 44 acres of land bearing Khewat Khata No. Rs.30 crores 95/95 and Khatoni No. 143 at Rajpura, Patiala, Punjab held by Industrial Cables (India) Ltd. (Defendant No. 13)
5. ICL Colony (known as Madhuban Colony) Rs.50 crores developed under PUDA license No.LDC2003/99 dated 24/04/2003 in Rajpura, Punjab on 22 acres of land bearing Khewat Khata No. 12/26 in Khasra No. CS(OS) 589/2021 SignaturePage Not Verified 11 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 29(7-10), 30(6-5), 31(6-13) 32(6-13), 33(5-
6), 34/2(4-14-16), 35/2(5-13-1), 36/2(4-10-
1), 37/2(3-5-1), 38/2(8-5-10), 39/2(7-0-1), 40/2(4-11-10), 72/41(1-14), 73/41(2-7), 74/42(3-10), 75/42(2-15), 76/43(4-4), 77/43(2-1), 44(4-11), 45(0-5), 46(0-5), 47(4-17) & 48(3-9) held by Industrial Cables (India) Ltd. (Defendant No. 13)
6. House no. 36, Sector-5, Chandigarh, Rs.75 crores admeasuring 4,550 square yards and house constructed on it held by Industrial Cables (India) Ltd. (Defendant No. 13)
7. Commercial building bearing No. 193, Rs.20 crores Shahpur Jat, New Delhi, constructed on 500 square yards plot consisting of 5 floors.
8. Commercial office at Unit No. 61, Mittal Rs.10 crores Towers, Nariman Point, Mumbai-400021 admeasuring 1,138 square feet held by P.E. Manning (Consultants) Pvt. Ltd.
(Defendant No 15)
9. Commercial office consisting of basement Rs.500 crores and 3rd floor at 254-C, Dr. Annie Besant Road, Worli, Mumbai - 400025, on a plot on main road admeasuring 4,000 square yards held by P.E. Manning (Consultants) Pvt. Ltd. (Defendant No 15).
10. 22.75 acres land at Village Kheri Sadh, Rs.50 crores District Rohtak, Haryana under Hadbast No. 42 and Khewat No. 252, 259, 267, 316 & 350, Khatoni No. 278, 286, 294, 345 & CS(OS) 589/2021 SignaturePage Not Verified 12 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 382 and Khasra No. 37/7-15, 37/17, 37/18, 14/25, 15/21, 15/22, 38/1-3, 38/6-9, 38/10/1 and 39/5 held by Amba Promoters & Developers Pvt. Ltd. (Defendant No. 16)
11. 30 acres of agricultural land at Village Rs.17 crores Bhalout, Distt. Rohtak, Haryana held by Ruchi Towers Pvt. Ltd. (Defendant No. 14)
(xv) The defendant no.13 has not purchased any property since the death of Sh. Devinder Chaudhary but is only selling of the properties held by it.
(xvi) The defendants no.4 and 9 also took various loans and advances from the aforesaid companies, which are described in paragraph 20 of the plaint. On the basis of the said loans and advances, the defendants no.4 and 9 purchased various properties in their names. The aforesaid loans are yet to be returned by the aforesaid defendants to the companies. The details of the loans/advances, as provided in paragraph 20 of the plaint, are as under:
Table V DATE PAID BY PAID TO AMOUNT (RS.) 26.12.2012 Amba Promoters & Def. No.4 2,00,00,000 Developers Pvt. Ltd.
31.07.2013 Darshan Properties LLP D.S.Edu. 10,00,00,000 Ven. Pvt.
Ltd.
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05.04.2014 Darshan Properties LLP Def. No.4 4,00,00,000
16.01.2015 ICL Machinery Pvt. Ltd. Def. No.4 70,00,000
28.05.2015 ICL Enterprises Def. No.4 60,00,000
11.08.2015 ICL Enterprises Def. No.4 50,00,000
17.07.2015 Rama Packing & Wires Def. No.4 3,50,00,000
Industries LLP
02.03.2016 Chandigarh Theatre Def. No.9 1,00,00,000
02.03.2016 P.E. Manning (Consultants) Def. No.9 3,00,00,000
Pvt. Ltd.
04.02.2017 ICL Industries Def. No.4 2,78,00,000
20.03.2019 Amba Promoters & Def. No.9 6,25,00,000
Developers Pvt. Ltd.
12.03.2020 Amba Promoters & Def. No.9 5,00,00,000
Developers Pvt. Ltd.
06.07.2019 ICL Machinery Pvt. Ltd. Def. No.9 6,29,03,340
06.07.2019 ICL Steel Def. No.9 5,19,46,000
14.08.2020 Chinar Industrial Investment Def. No.4 5,00,00,000
& Finance Ltd.
(xvii) The defendants no.4 and 9 have also purchased various properties from the sale proceeds of various assets held by the defendant companies/LLPs, which include:
a. A luxury apartment in Magnolia, Gurgaon;
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b. An accommodation on the first and second floor of Tower B, Magnum Towers, Golf Course Extension Road, Sector 58, Gurgaon; c. Office in Building No.7, Basantlok, Vasant Vihar, New Delhi; and, d. Factory in Village Khanpur, Purkazi Laskar Road, District Haridwar- 247663, Uttarakhand.
PLEADINGS IN THE WRITTEN STATEMENTS
6. Written statement has been filed on behalf of the defendant no.4, wherein it has been pleaded that:
(i) The present suit is not maintainable under the provisions of Section 430 of the Companies Act, 2013, as the reliefs sought in the present suit fall within the ambit of Section 59(1) of the Companies Act, 2013, which fall within the exclusive domain of the National Company Law Tribunal (NCLT) and bar the jurisdiction of the civil court.
(ii) The plaintiff has approached the Court with unclean hands and has made material suppressions. The plaintiff concealed the pleadings filed by her in the suit filed by the defendant no.1 herein, being CS(OS) 382/2020 (hereinafter referred to as 'first suit'). The schedule of properties filed with the plaint in the present suit is the same as that was filed with the plaint in the aforesaid first suit.
(iii) The plaintiff has taken a diametrically opposite stand in the first suit when compared to the stand being taken in the present suit. The reliefs sought in the present suit by the plaintiff are the same reliefs which were vehemently opposed by the plaintiff in the first suit. The CS(OS) 589/2021 SignaturePage Not Verified 15 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 plaintiff cannot be permitted to resile from her admissions made in the first suit. The various contradictions between the first suit and the present suit have been highlighted in paragraph 36 of the written statement.
(iv) The plaintiff has suppressed the pleadings filed in the probate proceedings, being PC No.4/2019 filed by defendant no.2, which is pending before the Saket District Court. In the said probate proceedings also, the plaintiff had vehemently opposed the reliefs now sought by the plaintiff in the present suit.
(v) The ex parte ad interim order dated 12th November, 2021 was passed by this Court on the basis of the misleading averment made on behalf of the plaintiff that the properties in Schedule A of the plaint were owned by late Sh. Devinder Singh Chaudhry. However, in the plaint, the plaintiff herself has admitted that the aforesaid properties were actually owned by various companies and not by late Sh. Devinder Singh Chaudhry.
(vi) The present suit as well as the interim application, being I.A. 14829/2021, was filed by the plaintiff in a clandestine manner without disclosing the pendency of the first suit in order to obtain an ex parte injunction order against the defendants.
(vii) The plaintiff has transferred her shares/interest in the defendants no.13, 15 and 16 companies/LLPs in favour of the defendant no.4 and 9 out of her own free will and without any undue influence or coercion. Not only did the plaintiff execute the gift deeds, she also CS(OS) 589/2021 SignaturePage Not Verified 16 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 signed the transfer forms in respect of the shares, handed over the relevant share certificates to the defendant no.4 and 9 and thereafter, complied with various legal formalities so as to complete the transfer of shares in favour of the defendant no.4 and 9.
(viii) All sale transactions carried out by the defendant companies in respect of the properties owned by the said companies are well documented and accounted for and there is no irregularity in the same. The plaintiff continues to be a director in the various companies and was well aware of all the above transactions being carried out by the aforesaid companies.
(ix) The plaintiff has no locus to question the loans taken by the defendants no.4 and 9 from the various companies/LLPs. Eight out of fifteen transactions mentioned in paragraph 20 of the plaint pertain to companies/LLPs that have not been impleaded as defendants in the suit. All the loans given by the companies to the defendants no.4 and 9 are backed by Board Resolutions and there is nothing irregular about the same.
(x) The plaintiff has herself gifted sums of money as well as properties amounting to approximately Rs.1,03,00,00,000/- to various family members of the plaintiff, the details whereof are given in paragraphs 2 to 8 of the written statement.
(xi) Upon the death of Sh. Devinder Singh Chaudhry, the plaintiff caused the transmission of shares of late Sh. Devinder Singh Chaudhry in her name by relying on the Will dated 26th March, 2004. Based on the CS(OS) 589/2021 SignaturePage Not Verified 17 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 aforesaid Will, the plaintiff acquired absolute interest in the estate of the deceased, including the shares/interest in the various companies/LLPs.
(xii) After the death of Sh. Devinder Singh Chaudhry, the defendant no.4 looked after all the requirements, expenses and medical necessities of the plaintiff.
(xiii) The plaintiff has been actively participating in all the decision making of the companies as well as interacting with her other family members.
(xiv) The plaintiff has been attending almost all the Board Meetings of the various companies and has been involved in the decision-making process of the companies.
(xv) The defendant no.13 company has been selling its assets for over a decade, the details whereof are given in paragraph 14 of the written statement.
(xvi) The defendant no.4 became a director of the defendant no.13 company only on 29th December, 2016 and therefore, prior to the said date, the defendant no.4 had no role to play in the management or the operations of the defendant no.13 company.
7. Written statement has been filed on behalf of the defendant no.13, wherein it has been pleaded that:
(i) The defendant no.13 is a delisted public limited company and has been engaged in the business of real estate for more than fifteen years.
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(ii) The plaintiff, who has been a director in the defendant no. 13
company since 1991, has always been aware of the said company being in the business of real estate for the last fifteen years.
(iii) All the real estate sold by the defendant no.13 company belonged to the company and therefore, the company was fully entitled to deal with the same.
(iv) The defendant no.4 became an additional director in the defendant no.13 company only from 2016 and there has been no material change in the functioning of the company after the said date.
(v) The primary contentions in the plaint are in respect of fraud alleged to have been committed by the defendants no.4 and 9 and under the garb of the same, the plaintiff has sought reliefs against the defendant no.13 company, which is a separate legal entity.
(vi) A residential project under the name of 'Garden Estate' and a commercial project under the name of 'ICL Spectrum' in Rajpura, Punjab is being currently executed. Sale of real estate is a part of the business operations of the defendant no.13 company and the interim order passed by this Court restraining the same has resulted in adversely affecting the business of the company.
(vii) Since the death of late Sh. Devinder Singh Chaudhry, the plaintiff has been the Chairman and Managing Director of the defendant no.13 company and various Minutes of the Board Meetings have been signed by her.
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(viii) After the death of Sh. Devinder Singh Chaudhry, upon the request of the plaintiff to transfer his shares in favour of the plaintiff on the basis of the Will dated 26th March, 2004, the defendant no.13 transferred of 13,56,290 shares in the name of the plaintiff after taking a legal opinion and executing the requisite documents.
(ix) Other averments, similar to the ones made by the defendant no.4, with regard to bar under Section 430 of the Companies Act, 2013, suppression/concealment of the first suit and the pleadings filed therein by the plaintiff as well as the contradictory stands taken by the plaintiff in both suits, have been made on behalf of the defendant no.13 company. The same are not being repeated for the sake of brevity.
8. The defendants no.3, 7 and 8 have filed a joint written statement essentially supporting the stand of the plaintiff. Written statement has also been filed on behalf of the defendant no.16 essentially supporting the stand of the defendants no.4, 9 and 13. No written statements have been filed on behalf of the remaining defendants, including the defendants no.14, 15, and
17.
9. In the replication filed on behalf of the plaintiff to the written statement filed by the defendant no.4, it has been pleaded that:
(i) In respect of the first suit, it was the defendant no.4 who got the pleadings/replies prepared on behalf of the plaintiff and instructed the counsel on behalf of the plaintiff. The plaintiff was not given to read any of the pleadings/replies and therefore, had no control over the CS(OS) 589/2021 SignaturePage Not Verified 20 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 stand which was taken on her behalf in the said proceedings.
Therefore, subsequently, by way of an application filed in the first suit, the plaintiff has sought to retract the pleadings filed on behalf of the plaintiff in the first suit.
(ii) The plaintiff was made to sign various documents, including gift deeds, share transfer forms, and Board Resolutions blindly and without being made to understand the contents or the purpose of the said documents. Consequently, the plaintiff signed all the aforesaid documents in good faith. As a result, the defendants no.4 and 9 fraudulently and clandestinely transferred unto themselves the majority shareholding/interest in various companies/LLPs by playing a fraud upon the plaintiff.
(iii) After getting complete control of the ownership and management of the companies, the plaintiff was confined to her Chandigarh residence and not permitted to freely move around. It was only after the plaintiff moved to Delhi in June, 2021 that she obtained detailed information and knowledge about the frauds committed by the defendants no.4 and 9 and filed the present suit.
(iv) The gifts made by the plaintiff in respect of family members other than the defendant no.4 are miniscule in comparison with the shares and assets illegally usurped by the defendants no.4 and 9. The sheer magnitude of the assets usurped by the defendants no.4 and 9 shows that the plaintiff was under undue influence and control of the defendant no.4.
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(v) The defendant no.13 has entered into a fraudulent collaboration
agreement with one JMD Realcon Pvt. Ltd. in respect of 94 acres of prime land in Rajpura, Punjab for the ICL Garden Estate project in terms of which the said JMD Realcon Pvt. Ltd. has been granted a share in the project in excess of 50% upon payment of a mere sum of Rs.1,00,00,000/-. This mechanism has been devised by the defendants no.4 and 9 to illegally divert the assets of the defendant no.13 company.
(vi) The plaintiff has not raised any dispute with regard to the sale of Madhuban Colony in Rajpura, Punjab property as well as the Ivory Towers project located in Sector-70, Mohali, Punjab as they constituted part of the lawful business of the defendant no.13 company. The illegalities of the defendants no.4 and 9 are in respect of the ICL Garden Estate project as well as the sale of vacant land, which was done behind the back of the plaintiff.
ANALYSIS AND FINDINGS
10. I shall now proceed to deal with the contentions raised by the counsels appearing on behalf of the parties.
WILL OF LATE SH. DEVINDER SINGH CHAUDHARY
11. Both sides have placed their own interpretations of the Will dated 26th March, 2004 executed by late Sh. Devinder Chaudhry. On one hand, senior counsels appearing on behalf of the plaintiff and the defendant no. 1 have submitted that in terms of the Will, no absolute interest has been created in favour of the plaintiff. At best, only a life interest was granted in favour of CS(OS) 589/2021 SignaturePage Not Verified 22 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 the plaintiff and therefore, she did not have the right to transfer the shares in favour of a third party. On the other hand, senior counsel for the defendants no. 4 and 9 has contended that absolute interest in the estate of late Sh. Devinder Chaudhary was bequeathed in favour of the plaintiff and therefore, she was entitled to transfer the shares in favour of a third party.
12. At this stage, it may be relevant to refer to the relevant clauses of the said Will:
"I. I hereby appoint my wife Sita Chaudhary and failing her Shri Vinod Chandiok of Walker Chandiok & Company, L-41, Connaught Circus, New Delhi -110001 and failing him Shri Satya Pal Jain of 30C orringway, EALING, London, W-5 and failing him Ms. Renu Malhotra of 6066 Champagne Court South East, Grand Rapids, Michigan - 49546 USA and failing her a person appointed by the competent court, in consultation with beneficiaries of this Will as far as possible, to be the executor of this my Will. The person to be appointed by the court should be a person from amongst the following categories. i. retired Judge of Supreme Court/ High Court II.
2. I hereby direct the Executor that after my death he/she shall collect and take possession of all the aforesaid properties and assets whatsoever and wheresoever situate and shall recover all outstandings due to me and pay thereout debts, if any, death duty, if any, leviable in respect of the estate left by me and other taxes and testamentary expenses and to deal with my residuary estate after making the aforesaid payments in the manner hereinafter directed. III.
1. I have entered into an agreement to sell my flat in the building known as Silver Arch Apartment Ferozesha Road New Delhi to Shri Satbachan Singh Lall and already received the agreed price from him and made a Will in his favour on the 29th day of January 2004 in respect of the said flat. In the event of legal title not getting transferred to Shri Satbachan Singh Lall through a sale deed during my life time, CS(OS) 589/2021 SignaturePage Not Verified 23 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 the said flat shall be treated as bequeathed to Shri Satbachan Singh Lall by me through this Will also.
2. During the period of the natural life of my wife Sita Chaudhry the executor (Sita Chaudhry) shall hold the entire residue of my estate to receive the annual or other income thereof and thereout and in the first place the executor shall pay or discharge all the costs and expenses incurred for the administration of the estate including taxes and duties of all types and subject thereto the executor shall pay, spend or apply the net income to or for the sole benefit of Sita Chaudhry in any manner whatsoever as desired by Sita Chaudhry.
3. Immediately after the day of death of my wife Sita Chaudhry, the Executor shall divide the entire residue of my estate into three equal parts:
a) One such equal part shall be dealt with in accordance with the provisions contained in Part IV of this Will and
b) The second such equal part to be held in trust in accordance with the provisions contained in Part V of this Will and
c) The third such equal part to be held in trust in accordance with the provisions contained in Part VI of this Will."
13. A perusal of the above said clauses of the Will would demonstrate that the plaintiff, being the wife of the testator, was appointed as the Executor of the Will in the first place. Clause III (2) provides that during the natural life of Sita Chaudhary (wife), Sita Chaudhary (Executor) is to spend/apply the net income for the sole benefit of Sita Chaudhry (wife). The aforesaid clause does not create any absolute right in favour of Sita Chaudhary/wife in the estate and only provides that during her lifetime, she would be entitled to the net income derived from the estate. At best, there was a limited estate granted in favour of the plaintiff under the aforesaid Will. It is only after the death of the plaintiff that the estate of the deceased CS(OS) 589/2021 SignaturePage Not Verified 24 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 testator was to be divided into three equal parts, as provided in clause III(3) of the Will.
14. Senior counsel appearing on behalf of the defendants no. 4 and 9 has strenuously urged that the phrase 'entire residue of my estate' occurring in clause III(3) refers to the estate left behind after the death of the plaintiff and therefore, the plaintiff was absolute owner of the estate in her lifetime and was well within her rights to transfer the estate in favour of any person.
15. I do not agree with this submission for the reason that the same phrase 'entire residue of my estate' has also been used in clause III(2) of the Will, which suggests that the reference to the phrase 'entire residue of my estate' refers to the estate left behind after taking into account clause III(1) of the Will. Otherwise, there was no purpose for using the phrase 'entire residue of my estate' in clause III(2) of the Will.
16. Therefore, in my prima facie view, the plaintiff did not have any absolute right to the estate of the testator and had only limited beneficial interest in the same and hence, could not transfer any part of the estate.
17. At this stage, it may be relevant to point out that the defendant no. 1 has also propounded a Will dated 4th October, 2008 of late Sh. Devinder Chaudhry in terms of which each of the three branches of the three sons of the plaintiff and late Sh. Devinder Chaudhry are beneficiaries. The probate case, being P.C. No. 4/2019, has been filed by the defendant no.2 before the District Court in Saket and the same is pending. If, ultimately, the said Will is held to be the last and genuine Will of late Sh. Devinder Chaudhry, the CS(OS) 589/2021 SignaturePage Not Verified 25 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 transfers made in favour of the plaintiff in terms of the Will dated 26th March, 2004 would be a nullity.
SECTION 14 OF THE HINDU SUCCESSION ACT
18. Next, senior counsels appearing on behalf of the defendants no.4 and 9 submitted that even if there was a limited interest created in favour of the plaintiff, the same got converted into full ownership by virtue of Section 14(1) of the Hindu Succession Act, 1956. On the other hand, counsel for the plaintiff submits that the present case would not be covered under Section 14(1) of the Hindu Succession Act, 1956 and would in fact fall under Section 14(2) of the Hindu Succession Act, 1956. For ease of reference, Section 14 of the Hindu Succession Act, 1956 is set out below:
"14. Property of a female Hindu to be her absolute property.―(1) Any property possessed by a female Hindu, whether acquired before or after the commencement of this Act, shall be held by her as full owner thereof and not as a limited owner.
Explanation.―In this sub-section, "property" includes both movable and immovable property acquired by a female Hindu by inheritance or devise, or at a partition, or in lieu of maintenance or arrears of maintenance, or by gift from any person, whether a relative or not, before, at or after her marriage, or by her own skill or exertion, or by purchase or by prescription, or in any other manner whatsoever, and also any such property held by her as stridhana immediately before the commencement of this Act.
(2) Nothing contained in sub-section (1) shall apply to any property acquired by way of gift or under a will or any other instrument or under a decree or order of a civil court or under an award where the terms of the gift, will or other instrument or the decree, order or award prescribe a restricted estate in such property."
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19. Counsels for both sides extensively referred to case laws with regard to the interpretation of the above provisions.
20. Senior counsel appearing on behalf of the defendants no. 4 and 9 has referred to the following paragraphs of the following judgments:
(i) Jupudy Pardha Sarathy v. Pentapati Rama Krishna & Ors., (2016) 2 SCC 56 "14. It is well settled that under the Hindu Law, the husband has got a personal obligation to maintain his wife and if he is possessed of properties then his wife is entitled to a right to be maintained out of such properties. It is equally well settled that the claim of Hindu widow to be maintained is not a mere formality which is to be exercised as a matter of concession, grace or gratis but is a valuable, spiritual and moral right. From the judicial pronouncement, the right of a widow to be maintained, although does not create a charge on the property of her husband but certainly the widow can enforce her right by moving the Court and for passing a decree for maintenance by creating a charge."
21. Following principles interpreting Section 14 of the Hindu Succession Act, as laid down in V. Tulasamma v. Sesha Reddy, (1977) 3 SCC 99, were quoted in Jupudy Pardha Sarathy (supra):
"30. In the light of the above decisions of this Court the following principles appear to be clear:
'(1) that the provisions of Section 14 of the 1956 Act must be liberally construed in order to advance the object of the Act which is to enlarge the limited interest possessed by a Hindu widow which was in consonance with the changing temper of the times;
(2) it is manifestly clear that sub-section (2) of Section 14 does not refer to any transfer which merely recognises a pre-existing right CS(OS) 589/2021 SignaturePage Not Verified 27 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 without creating or conferring a new title on the widow. This was clearly held by this Court in Badri Pershad case.
(3) that the Act of 1956 has made revolutionary and far-reaching changes in the Hindu society and every attempt should be made to carry out the spirit of the Act which has undoubtedly supplied a long felt need and tried to do away with the invidious distinction between a Hindu male and female in matters of intestate succession;
(4) that sub-section (2) of Section 14 is merely a proviso to sub- section (1) of Section 14 and has to be interpreted as a proviso and not in a manner so as to destroy the effect of the main provision.' "
(ii) Shakuntla Devi v. Kamla & Ors., (2005) 5 SCC 390 "2. Brief facts giving rise to these appeals are as follows:
One Hirday Ram was the owner of the suit property. He had three wives, namely, Kubja, Pari and Uttamdassi. Kubja had pre-deceased Hirday Ram leaving behind a daughter named Tikami. During his life time, Hirday Ram made a Will dated 1.10.1938 whereby he bequeathed a part of his property to his daughter Tikami and the remaining property was given to his two other wives, named above, for their maintenance with the condition that they would not have the power to alienate the same in any manner. As per the Will, after the death of the above two wives of Hirday Ram, the property was to revert back to his daughter Tikami as absolute owner. After the death of Hirday Ram and his second wife Pari in 1939, the property in question came to be vested with the third wife, Uttamdassi as per the terms of the Will.
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14. It is to be noticed that in the present case when the first declaratory decree was obtained, on the basis of the law as it stood then, the right of Uttamdassi remained a limited right, in the suit property hence, a declaratory decree was given in favour of the plaintiffs in that suit, but by the time the second declaratory decree CS(OS) 589/2021 SignaturePage Not Verified 28 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 was obtained by the appellant herein, this Court by the judgment in V. Thulasamma's case had declared the law under Section 14 of the Hindu Succession Act holding that the estate of persons similarly situated as Uttamdassi got enlarged and a beneficiary under a Will with limited rights became the absolute owner of the same. Since the judgment of this Court in Tulasamma's case was the law on that date and is the law currently, the second declaratory decree was contrary to the said declaration of law made by this Court. Therefore, that declaration cannot be of any use to the appellant in view of the law laid down by this Court in Mathura Prasad's case (supra) as extracted herein above."
(iii) Thota Sesharathamma & Ors. v. Thota Manikyamma (Dead) By LRs & Ors., (1991) 4 SCC 312 "31. Thus I hold that the Act revolutionised the status of a Hindu female; used Section 14(1) as a tool to undo past injustice to elevate her to equal status with dignity of person on par with man; extinguished pre-existing limitation of woman's estate, or widow's estate known to Sastric law removed all the fetters to blossom the same into full ownership. The discrimination suffered by Hindu female under Sastric law was exterminated by legislative fiat. The social change thus envisaged must be endeavoured to be given full vigour, thrust and efficacy. Section 14(1) enlarges the restricted estate into full ownership when the Hindu female has pre-existing right to maintenance etc. Sub.sec. (2) operates when the grant was made for the first time under the document with no pre-existing right. Sub-section (2), therefore, must be read as an exception or a proviso to Sub-section (1). Both the Sub-sections read with the explanation to be pragmatically considered as a constituent integral scheme. The Court would sit in the armed chair of the testator, or its maker summon to its aid the attending circumstances to execute the instrument; the relationship of the parties and to see whether the Hindu female acquired the property with vestige of pre-existing right and the will, gift deed, order, decree or an award of the civil court or in any of the forms known to law was executed in recognition thereof or entitled under the existing law. If the finding is positive her limited estate, though created with restrictive covenants CS(OS) 589/2021 SignaturePage Not Verified 29 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 in instrument or an omission to expressly so mentioned in full particulars thereof in the instrument in that regard are of little consequence. Her limited estate gets blossomed into full ownership under-sec. 14(1) with a right to bequeath, gift over, alienation or to deal in any manner recognised by law. If on the other hand the Hindu female acquires for the first time the title therein as a grant with restrictive estate under the instrument with no pre-existing title or right, Sub-section (2) of Section 14 gets attracted and the restrictive covenants contained in the instrument would bind her. She remains to be a limited owner in terms thereof. The subsequent alienee or transferee acquires no higher right thereunder than the legatee etc. The reversioner to the last male holder is not bound by such transfer and is entitled to succeed the estate, on her demise, in terms of the instrument. It is too late in the day to take retrograde step to reopen Tulasamma's ratio."
22. On the other hand, senior counsel for the plaintiff relies upon the following paragraphs from the following judgments in support of his submissions:
(i) Sadhu Singh v. Gurdwara Sahib Narike, (2006) 8 SCC 75 "7. Now, it is clear from the section and implicit from the decisions of this Court, that for Section 14(1) of the Act to get attracted, the property must be possessed by a female Hindu on the coming into force of the Hindu Succession Act. In Mayne on Hindu Law, 15th Edn., p. 1171, it is stated:
"On a reading of sub-section (1) with Explanation, it is clear that wherever the property was possessed by a female Hindu as a limited estate, it would become on and from the date of commencement of the Act her absolute property. However, if she acquires property after the Act with a restricted estate, sub-section (2) applies. Such acquisition may be under the terms of a gift, will or other instrument or a decree or order or award."
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12. On the wording of the section and in the context of these decisions, it is clear that the ratio in V. Tulasamma v. Shesha Reddy [(1977) 3 SCC 99 : (1977) 3 SCR 261] has application only when a female Hindu is possessed of the property on the date of the Act under semblance of a right, whether it be a limited or a pre-existing right to maintenance in lieu of which she was put in possession of the property. Tulasamma [(1977) 3 SCC 99 : (1977) 3 SCR 261] ratio cannot be applied ignoring the requirement of the female Hindu having to be in possession of the property either directly or constructively as on the date of the Act, though she may acquire a right to it even after the Act. The same is the position in Raghubar Singh v. Gulab Singh [(1998) 6 SCC 314 : AIR 1998 SC 2401] wherein the testamentary succession was before the Act. The widow had obtained possession under a will. A suit was filed challenging the will. The suit was compromised. The compromise sought to restrict the right of the widow. This Court held that since the widow was in possession of the property on the date of the Act under the will as of right and since the compromise decree created no new or independent right in her, Section 14(2) of the Act had no application and Section 14(1) governed the case, her right to maintenance being a pre-existing right. In Karmi v. Amru [(1972) 4 SCC 86 : AIR 1971 SC 745] the owner of the property executed a will in respect of a self-acquired property. The testamentary succession opened in favour of the wife in the year 1938. But it restricted her right. Thus, though she was in possession of the property on the date of the Act, this Court held that the life estate given to her under the will cannot become an absolute estate under the provisions of the Act. This can only be on the premise that the widow had no pre-existing right in the self-acquired property of her husband. In a case where a Hindu female was in possession of the property as on the date of the coming into force of the Act, the same being bequeathed to her by her father under a will, this Court in Bhura v. Kashi Ram [(1994) 2 SCC 111] after finding on a construction of the will that it only conferred a restricted right in the property in her, held that Section 14(2) of the Act was attracted and it was not a case in which by virtue of the operation of Section 14(1) of the Act, her right would get enlarged into an absolute estate. This again could only be on the basis that she had no pre-existing right in the property. In Sharad Subramanyan v. Soumi Mazumdar [(2006) 8 SCC 91 : JT (2006) 11 SC CS(OS) 589/2021 SignaturePage Not Verified 31 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 535] this Court held that since the legatee under the will in that case, did not have a pre-existing right in the property, she would not be entitled to rely on Section 14(1) of the Act to claim an absolute estate in the property bequeathed to her and her rights were controlled by the terms of the will and Section 14(2) of the Act. This Court in the said decision has made a survey of the earlier decisions including the one in Tulasamma [(1977) 3 SCC 99 : (1977) 3 SCR 261] . Thus, it is seen that the antecedents of the property, the possession of the property as on the date of the Act and the existence of a right in the female over it, however limited it may be, are the essential ingredients in determining whether sub-section (1) of Section 14 of the Act would come into play. What emerges according to us is that any acquisition of possession of property (not right) by a female Hindu after the coming into force of the Act, cannot normally attract Section 14(1) of the Act. It would depend on the nature of the right acquired by her. If she takes it as an heir under the Act, she takes it absolutely. If while getting possession of the property after the Act, under a devise, gift or other transaction, any restriction is placed on her right, the restriction will have play in view of Section 14(2) of the Act.
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13. An owner of property has normally the right to deal with that property including the right to devise or bequeath the property. He could thus dispose it of by a testament. Section 30 of the Act, not only does not curtail or affect this right, it actually reaffirms that right. Thus, a Hindu male could testamentarily dispose of his property. When he does that, a succession under the Act stands excluded and the property passes to the testamentary heirs. Hence, when a male Hindu executes a will bequeathing the properties, the legatees take it subject to the terms of the will unless of course, any stipulation therein is found invalid. Therefore, there is nothing in the Act which affects the right of a male Hindu to dispose of his property by providing only a life estate or limited estate for his widow. The Act does not stand in the way of his separate properties being dealt with by him as he deems fit. His will hence could not be challenged as being hit by the Act.
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14. When he thus validly disposes of his property by providing for a limited estate to his heir, the wife, the wife or widow has to take it as the estate falls. This restriction on her right so provided, is really respected by the Act. It provides in Section 14(2) of the Act, that in such a case, the widow is bound by the limitation on her right and she cannot claim any higher right by invoking Section 14(1) of the Act. In other words, conferment of a limited estate which is otherwise valid in law is reinforced by this Act by the introduction of Section 14(2) of the Act and excluding the operation of Section 14(1) of the Act, even if that provision is held to be attracted in the case of a succession under the Act. Invocation of Section 14(1) of the Act in the case of a testamentary disposition taking effect after the Act, would make Sections 30 and 14(2) redundant or otiose. It will also make redundant, the expression "property possessed by a female Hindu" occurring in Section 14(1) of the Act. An interpretation that leads to such a result cannot certainly be accepted. Surely, there is nothing in the Act compelling such an interpretation. Sections 14 and 30 both have play. Section 14(1) applies in a case where the female had received the property prior to the Act being entitled to it as a matter of right, even if the right be to a limited estate under the Mitakshara law or the right to maintenance."
(ii) Ranvir Dewan v. Rashmi Khanna and Anr., (2018) 12 SCC 1
23. Applying the law laid down in Sadhu Singh (supra), the Supreme Court made following observations:
"40. Reading of the aforementioned principle of law laid down in V. Tulasamma and Sadhu Singh, it is clear that the ambit of Section 14(2) of the Act must be confined to cases where property is acquired by a female Hindu for the first time as a grant without any pre-existing right, under a gift, will, instrument, decree, order or award, the terms of which prescribe a "restricted estate" in the property. Where, however, property is acquired by a Hindu female at a partition or in lieu of right of maintenance, it is in virtue of a pre-existing right and such an acquisition would not be within the scope and ambit of Section 14(2) of the Act, even if the instrument, decree, order or award allotting the property prescribes a "restricted estate" in the property.
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41. Applying the principle laid down in the aforementioned two cases to the facts of the case on hand, we are of the considered opinion that the case of Plaintiff 2, Mrs Pritam does not fall under Section 14(1) of the Act but it squarely falls under Section 14(2) of the Act. In other words, in our view, in the facts of this case, the law laid down in Sadhu Singh case would apply.
42. A fortiori, Plaintiff 2, late Mrs Pritam received only "life interest" in the suit house by the will dated 24-6-1986 from her late husband and such "life interest" was neither enlarged nor ripened into an absolute interest in the suit house and remained "life interest" i.e. "restricted estate" till her death under Section 14(2) of the Act. This we say for the following factual reasons arising in the case. 42.1 First, the testator, Mr Dewan being the exclusive owner of the suit house was free to dispose of his property the way he liked because it was his self-earned property.
42.2. Second, the testator gave the suit house in absolute ownership to his son and the daughter and conferred on them absolute ownership. At the same time, he gave only "life interest" to his wife i.e. a right to live in the suit house which belonged to son and daughter. Such disposition, the testator could make by virtue of Section 14(2) read with Section 30 of the Act.
42.3. Third, such "life interest" was in the nature of "restricted estate" under Section 14(2) of the Act which remained a "restricted estate" till her death and did not ripen into an "absolute interest"
under Section 14(1) of the Act. In other words, once the case falls under Section 14(2) of the Act, it comes out of Section 14(1). It is permissible in law because Section 14(2) is held as proviso to Section 14(1) of the Act.
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42.6. Sixth, it is a settled principle of law that the "life interest"
means an interest which determines on the termination of life. It is incapable of being transferred by such person to others being personal in nature. Such person, therefore, could enjoy the "life interest" only during his/her lifetime which is extinguished on his/her death. Such is the case here. Her "life interest" in the suit house was extinguished on her death on 12-9-2016.
42.7. Seventh, as mentioned above, the facts of the case on hand and the one involved in Sadhu Singh are found to be somewhat similar. The facts of Sadhu Singh were that the husband executed a will in favour of his wife of his self-acquired property in 1968. Though he gave to his wife absolute rights in the properties bequeathed but some restrictions were put on her right to sell/mortgage the properties and further it was mentioned in the will that the said properties after wife's death would go to the testator's nephew. Due to these restrictions put by the testator on his wife's right to sell/mortgage, it was held that the wife received only the "life interest" in the properties by will and such "life interest", being a "restricted estate" within the meaning of Section 14(2) of the Act, did not enlarge and nor ripen into the absolute interest under Section 14(1) but remained a "life interest" i.e. "restricted estate" under Section 14(2) of the Act. It was held that such disposition made by the husband in favour of his wife was permissible in law in the light of Section 14(2) read with Section 30 of the Act. In our view, the facts of the case on hand are similar to the facts of Sadhu Singh case and, therefore, this case is fully covered by the law laid down in Sadhu Singh case."
(iii) Jogi Ram v. Suresh Kumar and Ors., (2022) 4 SCC 274 "34. In our view the relevant aspect of the aforesaid conclusion is Conclusion (4) in para 62 which opines where sub-section (2) of Section 14 of the said Act would apply, and this does inter alia apply to a will which may create independent and new title in favour of females for the first time and is not a recognition of a pre-existing right. In such cases of a restricted estate in favour of a female is legally permissible and Section 14(1) of the said Act will not operate in that sphere.
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35. We may add here that the objective of Section 14(1) is to create an absolute interest in case of a limited interest of the wife where such limited estate owes its origin to law as it stood then. The objective cannot be that a Hindu male who owned self-acquired property is unable to execute a will giving a limited estate to a wife if all other aspects including maintenance are taken care of. If we were to hold so it would imply that if the wife is disinherited under the will it would be sustainable but if a limited estate is given it would mature into an absolute interest irrespective of the intent of the testator. That cannot be the objective, in our view.
36. The testator in the present case, Tulsi Ram, had taken all care for the needs of maintenance of his wife by ensuring that the revenue generated from the estate would go to her alone. He, however, wished to give only a limited life interest to her as the second wife with the son inheriting the complete estate after her lifetime. We are, thus, of the view that it would be the provisions of Section 14(2) of the said Act which would come into play in such a scenario and Ram Devi only had a life interest in her favour. The natural sequitur is that the respondents cannot inherit a better title than what the vendor had and, thus, the view taken by the trial court and the first appellate court is the correct view and the sale deeds in favour of the respondents cannot be sustained."
24. Applying the ratio of the aforesaid judgments to the facts of the present case, it cannot be said that the plaintiff had any pre-existing right in the properties of late Sh. Devinder Singh Chaudhary. The right was acquired by the plaintiff for the first time in terms of the Will dated 26th March, 2004 as a restrictive grant. Therefore, applying the ratio of Thota Sesharathamma (supra), Section 14(2) of the Hindu Succession Act would be attracted and the restrictive covenants in the aforesaid Will would bind the plaintiff. Further, the plaintiff came into possession of the properties after the death of late Sh. Devinder Singh Chaudhary, much after coming into force of the Hindu Succession Act, 1956. Therefore, in the facts and CS(OS) 589/2021 SignaturePage Not Verified 36 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 circumstances of the present case, the dicta in Sadhu Singh (supra) would be applicable and the present case would not fall under Section 14(1) but under Section 14(2) of the Hindu Succession Act. There was no right of maintenance that existed in favour of the plaintiff on the date of the enforcement of the said Act. In the facts and circumstances of the case, the judgments cited on behalf of the defendants would not be applicable.
25. It is clear from a reading of the Will dated 26th March, 2004 that the testator only intended to create a beneficial life interest in favour of the plaintiff. There was no legal bar on the testator from doing so as the testator was free to deal with his self-acquired properties in any manner he wished to. It may be relevant to note here that the testator had provided in his Will that the income from his various properties, after meeting expenses, including taxes and duties, shall be for the sole benefit of his wife, the plaintiff. Clearly, the testator had provided for the maintenance of his wife by providing that all the income generated from the estate would go to her during her lifetime. Therefore, following the dicta of Jogi Ram (supra), I am of the prima facie view that the case of the plaintiff is not covered under Section 14(1), but under Section 14(2) of the Hindu Succession Act, 1956 and consequently, the plaintiff did not have an absolute interest in the estate of late Sh. Devinder Singh Chaudhary.
26. It has been argued on behalf of the defendants that it was the own understanding of the plaintiff that she had absolute interest in the estate of late Sh. Devinder Chaudhry under the Will dated 26th March, 2004. On the basis of the aforesaid Will, the plaintiff herself wrote to the defendant no.13 company a letter dated 20th January, 2010 along with an affidavit after the CS(OS) 589/2021 SignaturePage Not Verified 37 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 death of late Sh. Devinder Chaudhry, that his shares be transmitted in the name of the plaintiff. On the request made by the plaintiff, the defendant no.13 company, acting on the basis of legal opinion, duly transmitted the shares of late Sh. Devinder Chaudhry in the defendant no. 13 company in favour of the plaintiff.
27. Merely because the plaintiff believed that she had absolute ownership and interest in the shares of late Sh. Devinder Chaudhary in terms of his Will, would not change the legal position that the plaintiff did not have any absolute right to the estate of the testator and had only limited beneficial interest in the same. Therefore, in my prima facie view, the plaintiff was neither entitled to be registered as an absolute owner in respect of the aforesaid shares and nor was the plaintiff entitled to create third party interest in respect of the said shares.
28. Senior counsels appearing on behalf of the defendants have relied upon Section 89 of the Companies Act, 2013 to contend that the plaintiff was not registered as a 'beneficial owner' of the said shares and therefore, should be assumed to be the absolute owner. Further, no other person has filed a declaration claiming to be the beneficial owner in respect of the said shares. To appreciate the aforesaid submission, a reference may be made to Section 89 of the Companies Act, 2013.
"89. Declaration in respect of beneficial interest in any share.--
(1) Where the name of a person is entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares, such person shall make a declaration within such time and in such form as may be prescribed to the company specifying the name and other particulars of the person who holds the beneficial interest in such shares.
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(2) Every person who holds or acquires a beneficial interest in
share of a company shall make a declaration to the company specifying the nature of his interest, particulars of the person in whose name the shares stand registered in the books of the company and such other particulars as may be prescribed.
(3) Where any change occurs in the beneficial interest in such shares, the person referred to in subsection (1) and the beneficial owner specified in sub-section (2) shall, within a period of thirty days from the date of such change, make a declaration to the company in such form and containing such particulars as may be prescribed. (4) The Central Government may make rules to provide for the manner of holding and disclosing beneficial interest and beneficial ownership under this section.
(5) If any person fails, to make a declaration as required under sub-section (1) or sub-section (2) or sub-section (3), without any reasonable cause, he shall be punishable with fine which may extend to fifty thousand rupees and where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the failure continues. (6) Where any declaration under this section is made to a company, the company shall make a note of such declaration in the register concerned and shall file, within thirty days from the date of receipt of declaration by it, a return in the prescribed form with the Registrar in respect of such declaration with such fees or additional fees as may be prescribed, within the time specified under section 403. (7) If a company, required to file a return under sub-section (6), fails to do so before the expiry of the time specified under the first proviso to sub-section (1) of section 403, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than five hundred rupees but which may extend to one thousand rupees and where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the failure continues. (8) No right in relation to any share in respect of which a declaration is required to be made under this section but not made by CS(OS) 589/2021 SignaturePage Not Verified 39 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 the beneficial owner, shall be enforceable by him or by any person claiming through him.
(9) Nothing in this section shall be deemed to prejudice the obligation of a company to pay dividend to its members under this Act and the said obligation shall, on such payment, stand discharged."
29. Merely because the plaintiff has not made a declaration in terms of Section 89(1) of the Companies Act, 2013, it would not imply that the plaintiff was the absolute owner of the said shares. It was at best a procedural lapse in respect of which consequences prescribed in Section 89(5) would be attracted. Further, the submission that none of the other legal heirs of late Sh. Devinder Singh Chaudhry have filed declarations claiming to be a beneficial owner in terms of Section 89 of the Companies Act, 2013 overlooks the fact that the legal heirs of late Sh. Devinder Singh Chaudhry are yet to become beneficial owners of the said shares. The right in their favour would arrive only after the plaintiff's death and therefore, there cannot be any question of the legal heirs claiming to be the beneficial owners to the said shares. Consequently, the aforesaid submission on behalf of the defendants is devoid of merits.
UNDUE INFLUENCE
30. Before the death of her husband, late Sh. Devinder Singh Chaudhry, the plaintiff was living with him in Chandigarh in one of the properties owned by the defendant no.13 company. At the time of death of her husband, the plaintiff was about seventy-three years of age and was suddenly left alone and vulnerable. None of her children were staying with her at that point of time. It was at that point of time that the defendant no. 4 along with her husband, the defendant no. 9, moved to Chandigarh and CS(OS) 589/2021 SignaturePage Not Verified 40 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 started living with the plaintiff. Taking advantage of the old age as well as the physical health of the plaintiff, the defendant no.4 slowly and steadily gained the trust and confidence of the plaintiff and started transferring the shareholding/interest in the various defendant companies/LLPs in her name and in the name of her husband, thereby taking control of the said companies/LLPs.
31. Vide two gift deeds dated 9th December, 2018, 18,012 shares of the defendants no. 15 company and 6,000 shares of the defendant no. 16 company were transferred by the plaintiff in favour of the defendant no. 4. A perusal of the aforesaid gift deeds shows that the plaintiff has transferred the shares in favour of the defendant no. 4 on account of 'natural love and affection'. It is pertinent to note that the aforesaid gift deeds have neither been notarized nor are they adequately stamped. Further, the place for the witnesses to sign on the gift deeds has been left blank. The fact that a large amount of shareholding in the defendants no. 15 and 16 companies have been transferred in this manner in favour of the defendant no. 4, arouses suspicion as to whether the same has been done in a transparent and lawful manner.
32. Similarly, vide supplementary agreements dated 14th March, 2019 and 24th April, 2019, the defendant no. 4 and defendant no. 9 took over as partners in the defendants no. 14 and 17 LLPs. Once again, there is no apparent reason as to why the aforesaid documents were executed, giving complete control of these entities to the defendants no.4 and 9. It is pertinent to note here that the defendant no.14 LLP owns 44.1% shares in the defendant no.13 company and 52.5% interest in the defendant no.17 LLP.
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33. In respect of 21,21,240 shares in the name of the plaintiff in the defendant no. 13 company, a delivery instructions slip is stated to have been executed by the plaintiff in favour of the defendant no. 4 on 6th June, 2019, purporting to transfer her shareholding in the defendant no. 13 company in favour of the defendant no. 4 as a gift. Significantly, instead of the phone number of the plaintiff, the phone number of the defendant no. 4 has been mentioned in the said delivery instructions slip. Moreover, there is a mismatch between the two signatures of the plaintiff on the said delivery instructions slip. Admittedly, the aforesaid transfer of shares of the defendant no.13 company in favour of the defendant no. 4 was without any consideration.
34. On the basis of the aforesaid document, the defendant no. 4, who had zero shareholding in the defendant no. 13 company acquired 33.6% of the shares of the defendant no.13 company. Further, by acquiring control of the defendant no.14 LLP, the defendant no.4 got control of a further 44.1% shares of the defendant no.13 company held by the defendant no.14 LLP. Immediately after acquiring control of the defendant no. 13 company, a rights issue was taken out and by manipulating the same, the defendant no.4 further enhanced her shareholding and control of the defendant no. 13 company. It is an admitted position that the defendant no. 13 company is the main company, which holds the maximum number of properties.
35. In respect of the first suit that was filed by the defendant no. 1 herein, in which the plaintiff was arrayed as the defendant no. 1, it was the defendant no. 4 who engaged the counsels on behalf of the plaintiff. The various pleadings, replies, etc. on behalf of the plaintiff were prepared on CS(OS) 589/2021 SignaturePage Not Verified 42 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 the instructions of the defendant no. 4. The plaintiff had no say in the stand which was being taken on her behalf in the said proceedings. This is evident from the invoice of the law firm that was representing the plaintiff in the said suit. Though the said invoice is in the name of the plaintiff, it was drawn to the attention of the defendant no. 4 and was sent to her email address. It appears that the lawyers were taking instructions from the defendant no.4, and it was the defendant no.4 who was clearing their bills. On a prima facie view, it appears that the plaintiff signed the various pleadings/replies, etc. under undue influence of the defendants no.4 and 9, without understanding the nature and contents of the said pleadings/replies.
36. It was only when the plaintiff moved to Delhi in June, 2021 that the plaintiff realized the purport and effect of the various documents executed by her while living with the defendants no. 4 and 9 in Chandigarh. Immediately thereafter, an application, being I.A. No. 15902/2021, was filed on behalf of the plaintiff for disregarding the pleadings filed on her behalf in the first suit.
37. At this stage, I would like to refer to the scope of 'undue influence' and the legal position with regard to the same. Section 16 of the Indian Contract Act, 1872, defines 'undue influence'. For ease of reference, the said section is set out below:
"16. "Undue influence" defined.--(1) A contract is said to be induced by "undue influence" where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.
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(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another--
(a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or
(b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.
(3) Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other.
Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872 (1 of 1872)."
38. The scope of the aforesaid section is explained by the illustrations provided therein. For the purposes of the present case, reference may be made to illustrations (a) and (b):
"Illustrations
(a) A having advanced money to his son, B, during his minority, upon B's coming of age obtains, by misuse of parental influence, a bond from B for a greater amount than the sum due in respect of the advance. A employs undue influence.
(b) A, a man enfeebled by disease or age, is induced, by B's influence over him as his medical attendant, to agree to pay B an unreasonable sum for his professional services. B employs undue influence."
39. Reference may also be made to Section 111 of the Indian Evidence Act, 1872, which is set out below:
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"111. Proof of good faith in transactions where one party is in relation of active confidence.--Where there is a question as to the good faith of a transaction between parties, one of whom stands to the other in a position of active confidence, the burden of proving the good faith of the transaction is on the party who is in a position of active confidence.
Illustration
(b) The good faith of a sale by a son just come of age to a father is in question in a suit brought by the son. The burden of proving the good faith of the transaction is on the father."
40. In support of his submissions in respect of undue influence, the counsel for the plaintiff has relied on the judgment in Keshav and Ors. v. Gian Chand and Anr., (2022) SCC OnLine SC 81. Relevant observations are set out below:
"9. ...When a person obtains any benefit from another, the court would call upon the person who wishes to maintain the right to gift to discharge the burden of proving that he exerted no influence for the purpose of obtaining the document. Corollary to this principle finds recognition in sub-section (3) to Section 16 of the Indian Contract Act, 1872 which relates to pardanashin ladies. The courts can apply this principle to old, illiterate, ailing or infirm persons who may be unable to comprehend the nature of document or contents thereof. Equally, one who bargains in the matter of advantage with a person who places confidence in him is bound to show that a proper and reasonable use has been made of that confidence. The burden of establishing perfect fairness, adequacy and equity is cast upon the person in whom the confidence has been reposed. Therefore, in cases of fiduciary relationships when validity of the transaction is in question it is relevant to see whether the person conferring the benefit on the other had competent and independent advice."
41. While making the aforesaid observation, the Supreme Court relied upon an earlier judgment in Krishna Mohan Kul alias Nani Charan Kul CS(OS) 589/2021 SignaturePage Not Verified 45 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 and Anr. v. Pratima Maity and Ors., (2004) 9 SCC 468, wherein it was held that when undue influence is alleged in respect of a person who is in a dominating position, it is the said dominating person who has to prove that there was fair play in the transaction and the transaction was genuine and bona fide. It was further noted that this principle has been enshrined in Section 111 of the Indian Evidence Act, 1872 and is in accordance with the principle long acknowledged and administered by the Courts of Equity in England and America.
42. The principles with regard to applying the plea of undue influence were also elucidated by the Supreme Court in Jamila Begum (Dead) Through Leal Representatives v. Shami Mohd. (Dead) Through Legal Representatives and Ar., (2019) 2 SCC 727. Paragraph 29 of the aforesaid judgment is set out below:
"29. While considering the aspect of plea of undue influence and onus probandi, in Subhas Chandr Das Mushib v. Ganga Prasad Das Mushib [Subhas Chandr Das Mushib v. Ganga Prasad Das Mushib, AIR 1967 SC 878] , it was held as under: (AIR p. 880, paras 4 & 7) "4. Under Section 16(1) of the Contract Act a contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. This shows that the court trying a case of undue influence must consider two things to start with, namely, (1) are the relations between the donor and the donee such that the donee is in a position to dominate the will of the donor, and (2) has the donee used that position to obtain an unfair advantage over the donor?
* * *
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7. The three stages for consideration of a case of undue influence were expounded in Raghunath Prasad Sahu v. Sarju Prasad Sahu [Raghunath Prasad Sahu v. Sarju Prasad Sahu, 1923 SCC OnLine PC 62 : (1923-24) 51 IA 101 : AIR 1924 PC 60] in the following words: (SCC OnLine PC) 'In the first place the relations between the parties to each other must be such that one is in a position to dominate the will of the other. Once that position is substantiated the second stage has been reached viz. the issue whether the contract has been induced by undue influence. Upon the determination of this issue a third point emerges, which is that of the onus probandi. If the transaction appears to be unconscionable, then the burden of proving that the contract was not induced by undue influence is to lie upon the person who was in a position to dominate the will of the other. Error is almost sure to arise if the order of these propositions be changed. The unconscionableness of the bargain is not the first thing to be considered. The first thing to be considered is the relations of these parties. Were they such as to put one in a position to dominate the will of the other?' "
43. Applying the aforesaid principles of law to the facts of the present case, the defendants no.4 and 9 were indeed in a position to dominate the will of the plaintiff so as to obtain an unfair advantage. The plaintiff was about eighty-three years of age when the aforesaid transfers/gifts were made, lived alone with the defendants no.4 and 9 and was totally dependent on them. Admittedly, the transfers/gifts were made without any consideration and the defendants no.4 and 9 were the beneficiaries of the same. The sheer volume and magnitude of the transfers, as provided in table II above, make them unconscionable. The defendants no.4 and 9 have completely failed to demonstrate that the transfers/gifts were made in good faith and were not induced by undue influence.
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44. It defies logic as to why the plaintiff would transfer all her interest in favour of the defendant no.4 and her husband, the defendant no.9 to the exclusion of all other legal heirs. It is nobody's case that the plaintiff was not on good terms with the rest of her legal heirs. Though, it has been contended on behalf of the defendants no. 4 and 9 that the plaintiff has also transferred her interest in favour of other legal heirs, the same appears to be miniscule compared to the transfers made in favour of the defendants no. 4 and 9.
45. Therefore, in my prima facie view, the various documents executed by the plaintiff transferring/gifting her shares and interest in the defendant companies/LLPs in favour of the defendant no. 4 and the defendant no. 9 were on account of 'undue influence' exercised by the defendants no. 4 and 9 upon the plaintiff. Of course, these prima facie findings would be subject to the outcome of the trial in the suit.
46. Senior counsel for the defendants no.4 and 9 has relied upon the various photographs showing the plaintiff at family events to submit that the plaintiff was not under the influence of the defendants no. 4 and 9. In my view, no reliance can be placed on the said photographs to come to a conclusion that the defendants no. 4 and 9 did not exercise undue influence over the plaintiff.
47. Senior counsels appearing on behalf of the defendants no. 4, 9 and 13 have contended that the transfers as well as the gifts were completed/executed as far back as in 2018-2019 and proper legally valid documents were executed in respect thereof. Further, Board Resolutions CS(OS) 589/2021 SignaturePage Not Verified 48 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 approving the said transfers were duly passed by the companies in presence of the plaintiff and duly signed by her. It is further contended that the plaintiff continues to be the Managing Director in the defendant no.13 company and has never raised any objection with regard to the aforesaid transfer of shares or any other transactions till date. Therefore, it is submitted that the aforesaid challenge, at this stage, is barred on account of acquiescence, waiver and estoppel.
48. In view of my findings above that the defendants no.4 and 9 exercised undue influence over the plaintiff and the aforesaid documents transferring/gifting the shares, including the Board Resolutions, were executed on account of the undue influence exercised by them, a serious doubt is created over the bona fide and genuineness of these documents. The undue influence continued till June, 2021, when the plaintiff finally moved to Delhi to live with her other legal heirs. Therefore, there was no occasion for the plaintiff to question any of the aforesaid documents or Board Resolutions while she continued to live with the defendants no. 4 and 9 and be under their influence. The challenge could only be made after the plaintiff moved to Delhi and which was duly made by the plaintiff.
49. Therefore, I do not find any merit in the submission made on behalf of the defendants no. 4, 9 and 13 that the plaintiff never objected to any of the share transfers, or gifts, or the Board Resolutions passed at an earlier point of time. Similarly, I do not find merit in the submissions made on behalf of the defendants no. 4, 9 and 13 in respect of the contradictory stand taken by the plaintiff in the first suit.
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DISPOSAL OF ASSETS BY THE DEFENDANTS NO. 4 AND 9
50. It is contended on behalf of the plaintiff that immediately upon taking control of the defendant companies, the defendants no. 4 and 9 started treating the said companies as their personal fiefdoms. In paragraph 19 of the plaint, details of sale of the property held by the defendant no.16 has been given and it has been stated that the said property was sold at a price below the market value. It has further been stated that after the aforesaid sale, loans and advances were taken from the defendant no.16 by the defendants no.4 and 9, which are yet to be repaid.
51. The defendants no.4 and 16 in their written statements have not denied the sale of the aforesaid property. They have only stated that the aforesaid sales were made in the ordinary course of business at market value. Nor have the defendants no.4 and 9 denied the loan of Rs.11,25,00,000/- from the defendant no.16 company.
52. Though it has been contended on behalf of the defendant no.13 that it was in the business of purchase and sale of properties, no details of properties purchased by the defendant no.13 company after 2010 have been provided. This gives credence to the averment of the plaintiff that the defendants no.4 and 9 were simply selling the properties that belonged to the defendant no.13 company after acquiring control of the defendant no.13 company.
53. On 11th October, 2021, the defendant no.13 company entered into three collaboration agreements in terms of which the company granted development rights in relation to a property admeasuring about 94 acres of CS(OS) 589/2021 SignaturePage Not Verified 50 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 prime land in Rajpura, Punjab to JMD Realcon Pvt. Ltd. and in lieu of development of the project, JMD Realcon Pvt. Ltd. has been granted land rights in the project in excess of 50% upon payment of only Rs.1,00,00,000/- to the company, in the following terms:
(i) 40.1% of Commercial area and 40.2% of Residential area on 35 acres of land at Town No.1, Rajpura Township, Rajpura, Patiala, Punjab.
(ii) 70% of 44 acres of land located in Shamboo, Rajpura, Punjab,
(iii) 55% of 17.39 acres of land located at ICL Road in Rajpura, Punjab.
54. Three separate Sale Deeds have been executed between defendant no.13 in favour of JMD Realcon Pvt. Ltd, the details which are as under:
(i) Sale Deed for 33 acres of land in Garden Estate was executed on 22nd October, 2021;
(ii) Sale Deed for 44 acres of land in Mehtabgarh was executed on 25th October, 2021; and,
(iii) Sale Deed for 17.39 acres of factory land was executed on 1st November, 2021.
55. It has not been disputed that JMD Realcon Pvt. Ltd. has a paid-up share capital of only Rs. 1,00,000/-. Further, nothing is on record to demonstrate the capability, financial or otherwise, of JMD Realcon Pvt. Ltd. to deal with the project. In the notice to the AGM of the defendant no.13, which was to be held on 30th November, 2021, an agenda was put up for the approval of the aforesaid agreements/sale deeds in favour of JMD Realcon CS(OS) 589/2021 SignaturePage Not Verified 51 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 Pvt. Ltd. Even though the plaintiff continues to be the CMD of the defendant no. 13 company, no notice for the AGM held on 30th November, 2021 was received by her as it was sent to the Chandigarh address, where the plaintiff was no longer residing. Upon I.A. 8267/2022 being moved by the plaintiff, this Court, vide order dated 25th May, 2022 had directed the parties to maintain status quo qua the lands which are subject matter of the Sale Deeds dated 22nd October, 2021, 25th October, 2021 and 1st November, 2021.
LOANS TAKEN/AMOUNTS SIPHONED FROM THE DEFENDANT COMPANIES/LLPS AND OTHER FAMILY-OWNED ENTITIES
56. In support of her contention that various loans/advances have been given to the defendants no.4 and 9 by the defendant companies/LLPs, the plaintiff has placed on record the following documents:
(i) Letter dated 20th March, 2020 written by Chinar Industrial Investment & Finance Ltd. (defendant no. 21 in the first suit) to the defendant no. 4 as well as the Board Resolution dated 20th March, 2020, wherein it is recorded that an advance of Rs.5,00,00,000/- has been paid to the defendant no. 4 towards purchase of Flat No. C-4/4007, Vasant Kunj, New Delhi and Plot No. R-1/A407 Hyde Park, Mullanpur. Since the said transaction could not go through, the said defendant no. 21 agreed to accept the refund of the amount without interest.
(ii) Board Resolution dated 17th May, 2019 passed by the Board of Directors of ICL Machinery Pvt. Ltd. (defendant no. 17 in the first suit), wherein it is stated that an advance of Rs.6,29,03,340/- shall be given to the defendant no. 9 towards purchase of First Floor and CS(OS) 589/2021 SignaturePage Not Verified 52 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 Second Floor of Tower-B, Magnum Towers, Golf Course Extension Road, Sector-58, Gurugram-122011.
(iii) Board Resolution dated 26th March, 2016 passed by the Board of Directors of Chandigarh Theatres Pvt. Ltd., wherein it is recorded that Rs.1,00,00,000/- has been advanced by the said company to the defendant no.9 towards purchase of 7 acres of Agricultural Land at Laksar.
(iv) Board Resolution dated 26th March, 2016 passed by the Board of Directors of P.E. Manning (Consultants) Pvt. Ltd. (defendant no.15), wherein it is stated that Rs.3,00,00,000/- has been advanced by the defendant no.15 to the defendant no. 9 towards purchase of 20 acres of Agricultural Land at Laksar. The said Board Resolution further records that the defendant no. 9 would not be liable to pay any interest on the aforesaid advanced amount.
(v) Bank statements showing amounts of Rs.6,29,03,340/- transferred from ICL Machinery Pvt. Ltd (defendant no.17 in the first suit) to the defendants no.9 and Rs. 5,19,46,000/- transferred from M/s ICL Steels (Haryana) LLP (defendant no.18 in the first suit) to the defendant no.9.
57. All the aforesaid Board Resolutions sanctioning the loans/advances have been signed by the plaintiff. Nowhere have the defendants no.4 and 9 denied that loans of such nature were ever taken or that they have not been repaid. The defendants no.4 and 9 have only challenged the locus of the plaintiff to challenge the same. It has further been stated that some of the entities from which loans were taken are not even parties to the suit.
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58. Clearly, the said resolutions are evidence of the undue influence exercised by the defendants no. 4 and 9 over the plaintiff. The aforesaid loans were given and the resolutions approving the said loans were passed only on account of the defendants no. 4 and 9 exercising complete control over the affairs of the said companies/LLPs. It emerges from the above that the defendants no. 4 and 9 have been treating the various defendant companies/LLPs as their fiefdoms and are frittering away the assets and funds of the said companies/LLPs.
59. The defendants no.3, 7 and 8 have placed on record bank statements of the defendants no.16, Amba Promoters and Developers Pvt. Ltd to show the unlawful transfers made to bank accounts of the defendants no.4 and 9 from the defendant no.16 even after passing the status quo order on 12th November, 2021. The details are given below:
Table VI DATE OF THE STATUS OF THE S. NO. TRANSFER AMOUNT TRANSFER
1. 17.11.2021 Rs.3,00,00,000/- All transfers have been made from the
2. 18.11.2021 Rs.4,00,00,000/-
bank account of the
3. 18.11.2021 Rs.4,22,66,000/- defendant no.16 to the personal bank account of the defendant no.4 CS(OS) 589/2021 SignaturePage Not Verified 54 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58
60. The defendants no.4 and 9 have not denied the purchase of properties given in paragraph 22 of the plaint, in their individual names. Further, from the Board Resolutions referred above, it is clear that loans/advances were taken by the defendants no.4 and 9 from family-owned companies to purchase properties in their individual names.
DEFENDANT COMPANIES/LLPS BEING SEPARATE LEGAL ENTITIES
61. Senior counsel appearing on behalf of the defendant no.13 company vehemently contends that the defendant no.13 company is an independent and a separate legal entity and holds various properties in its own name. It cannot be stated that the aforesaid properties belonged to late Sh. Devinder Singh Chaudhry or the plaintiff. The defendant no.13 company has been in the business of real estate even before the death of late Sh. Devinder Singh Chaudhry and, in fact, since 2010, the main business of the defendant no.13 company has been in the field of real estate and the plaintiff was well aware of that. Reliance is placed on the judgment of the Supreme Court in Bacha F. Guzdar, Bombay v. Commissioner Of Income Tax, Bombay, AIR 1955 SC 74 to contend that a shareholder does not have any interest in the assets of the company and the shareholder only has a right to either independently or collectively participate in the profits of the company, which is a juristic person and is distinct from the shareholders.
62. On the other hand, the counsel for the plaintiff has relied upon the judgment in Sangramsinh P. Gaekwad And Ors. v. Shantidevi P. Gaekwad (Dead) Through LRs., (2005) 11 SCC 314 in support of his contention that the various defendant companies, including the defendant no. 13 company, were basically family-owned companies and in the nature of quasi-
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partnerships. Therefore, the Court has the power to lift the corporate veil to determine the real character of the said companies. The relevant observations in Sangramsinh P. Gaekwad (supra) are reproduced below:
"Quasi-partnership -- family company -- corporate veil
225. A company incorporated under the Companies Act is a body corporate. However, in certain situations, its corporate veil can be lifted. (See Kapila Hingorani v. State of Bihar [(2003) 6 SCC 1 : 2004 SCC (L&S) 586].)
226. The Court, however, has made a clear distinction between a family company, a private company and a public limited company. The true character of the company, the business realities of the situation should not be confined to a narrow legalistic view. (See Needle Industries [(1981) 3 SCC 333].)
227. It is now well known that principles of quasi-partnership are not foreign to the concept of the Companies Act. For the purpose of grant of relief the principles of partnership have been applied even in a public limited company. (See Loch v. John Blackwood Ltd. [1924 AC 783 : 1924 All ER Rep 200] and Ebrahimi v. Westbourne Galleries Ltd. [(1972) 2 All ER 492 : 1973 AC 360 : (1972) 2 WLR 1289 (HL)] ) XXX XXX XXX
230. Kilpest (P) Ltd. v. Shekhar Mehra [(1996) 10 SCC 696] whereupon Mr Desai placed strong reliance, thus, cannot be said to be an authority for the proposition that for no purpose whatsoever can the principles of quasi-partnership be applied to an incorporated company. The real character of the company, as noticed hereinbefore, for the purpose of judging the dealings between the parties and the transactions which are impugned may assume significance and in such an event, the principles of quasi-partnership in a given case may be invoked.
231. The ratio of the said decision, with respect, cannot be held to be correct as a bare proposition of law, as was urged by Mr Desai, being contrary to larger Bench judgments of this Court and in CS(OS) 589/2021 SignaturePage Not Verified 56 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 particular Needle Industries [(1981) 3 SCC 333]. It is, however, one thing to say that for the purpose of dealing with an application under Section 397 of the Companies Act, the court would not easily accept the plea of quasi-partnership but as has been held in Needle Industries [(1981) 3 SCC 333] the true character of the company and other relevant factors shall be considered for the purpose of grant of relief having regard to the concept of quasi-partnership."
63. Initially, almost the entire shareholding in these companies/LLPs was held directly or indirectly by late Sh. Devinder Chaudhry and the plaintiff (see Table I above). After the transfer/gift of the shares in favour of the defendant no. 4 and 9, almost the entire shareholding in the said companies now vest with the defendants no. 4 and 9 (see Table III above). It is pertinent to note that the defendants no.4 and 9 have not disputed the shareholding position as given in the aforesaid table.
64. Table III above shows that the defendants no.4 and 9 are the only significant shareholders in the aforesaid entities and are also the directors/partners. There is negligible amount of outside shareholding. At all points of time, the companies were closely held and did not have any substantial shareholding outside the family. Except for the defendant no.13 company, none of the companies/LLPs had any running business. Therefore, I find merit in the submission of the plaintiff that the various defendant companies/LLPs, other than the defendant no. 13 company, have always been asset holding companies/LLPs. Even in respect of the defendant no.13 company, almost 83% is held by the defendant no.4, as is evident from the Form No.BEN-1 dated 10th September, 2019 filed on behalf of the defendant no.4 and the outside shareholding is only 6.8%. The defendant companies/LLPs are mere alter egos of the defendants 4 and 9, in CS(OS) 589/2021 SignaturePage Not Verified 57 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 the nature of quasi-partnerships. The defendants no.4 and 9 have been treating these companies/LLPs as their personal fiefdoms, as is evident from the various instances of properties/assets being disposed of. Loans have been doled out and monies siphoned off in an arbitrary manner and without any commercial logic, solely on account of the fact that the defendants no.4 and 9 control these companies/LLPs.
65. Therefore, in my prima facie view, the principles laid down in Sangram Singh Gaikwad (supra) can be applied to the facts of the present case and the Court can look into true character of the company for the purposes of grant of relief.
CONCEALMENT
66. It has been strongly urged on behalf of the defendants no.4, 9 and 13 that the plaintiff has been guilty of concealment and suppression of the following facts/documents/pleadings:
(i) The plaintiff has failed to provide details of various documents executed by the plaintiff for transfer of shares by the plaintiff in favour of the defendant no.4, nor have any particulars being given in respect of the same. The various documents executed by the plaintiff have been filed by the defendants.
(ii) Pleadings filed in the first suit on behalf of the plaintiff have not been disclosed, wherein the plaintiff has taken a stand completely contrary to the present case. Without disclosing or explaining the previous pleadings filed on behalf of the plaintiff in the first suit, the plaintiff obtained an ex parte injunction order in the present suit. In respect of CS(OS) 589/2021 SignaturePage Not Verified 58 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 similar properties, no interim order has been passed till date in the first suit.
(iii) Assets transferred in favour of other legal heirs of the plaintiff, of which details have been given in the written statement filed on behalf of the defendant no.4. Further, attention of the Court has been drawn to various other agreements entered into by the plaintiff, wherein other grandchildren of the plaintiff were inducted as partners in other LLP's where the plaintiff was a partner.
67. As regards concealment of the pleadings filed on behalf of the plaintiff in the first suit, it has rightly been submitted on behalf of the plaintiff that the intention of the plaintiff was always to have the present suit listed along with the first suit and therefore, there was no need to file the pleadings of the first suit in the present suit. In this regard, reference may be made to the letter dated 22nd October, 2021 written by the counsel for the plaintiff in the second suit seeking listing of the present suit on 25th October, 2021, when the first suit was listed.
68. As regards concealment in respect of the documents executed on behalf of the plaintiff for transfer of shares, I have already observed above that the documents were executed by the plaintiff under undue influence of the defendants no.4 and 9. Therefore, I find merit in the submission of the plaintiff that the plaintiff cannot be expected to note exact details of the documents executed by her, especially, when she did not have copies of the same. Similarly, the plaintiff cannot be expected to remember the exact date when the transfers were made, or the date when the documents executed for CS(OS) 589/2021 SignaturePage Not Verified 59 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 the said transfers, or the dates on which the said transfers were approved by the Board of Directors.
69. As regards the concealment in respect of transfers and gifts made in favour of other grandchildren of the plaintiff, I have already observed above that the same are miniscule as compared to the transfers/gifts made in favour of the defendants no.4 and 9. Further, as per the plaintiff, the said gifts were made by her as per her free will and not under undue influence.
70. Next, it was submitted on behalf of the defendants no.4, 9 and 13 that the present suit was mentioned in a deceptive manner when the matter got listed and ad interim order dated 12th November, 2021 was obtained behind back of the said defendants. Further, it was not disclosed to the Court that in the first suit, no interim orders have been passed till date in favour of the plaintiff therein. It is contended on behalf of the defendants no.4, 9 and 13 that the present suit was first filed on 21st October, 2021 and continued to remain under defects. On 11th November, 2021, an advance copy of the suit was served on the defendant no.4.The first suit was listed before the Court on 12th November, 2021 as Item No.14. The defendants were expecting the present suit also to be listed on 12th November, 2021, however, the said suit was not listed on the said date. When the first suit was taken up by the Court on its turn, the defendant no.1 (plaintiff therein) in the said suit did not appear. It was only later that the counsel for the defendant no.4 came to know that the plaintiff had mentioned the present suit before the acting Judge In-Charge (Original Side) at around 300 P.M., the mentioning was allowed, and the present suit was listed on 12th November, 2021 itself. It is CS(OS) 589/2021 SignaturePage Not Verified 60 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 submitted that the ex-parte order would not have been passed had the said defendants been present to apprise the Court of the aforesaid facts.
71. On the other hand, the senior counsel for the plaintiff has placed reliance on the synopsis filed on behalf of the plaintiff by the previous counsel, who had filed the present suit and had appeared on behalf of the plaintiff on 12th November, 2021. It is stated on behalf of the plaintiff that advance copy of the present suit was duly served on the counsels appearing on behalf of the defendants vide e-mail dated 22nd October, 2021, wherein it was specifically stated that the present suit along with the interim application would be listed on 25th October, 2021, the date on which the first suit was already listed. Once again, an urgent mentioning request was made on behalf of the plaintiff to the Registry on 25th October, 2021 requesting that the present suit may be listed on 25th October, 2021, when the connected suit, filed after the first suit, was listed. However, on account of objections marked by the Registry, the present suit could not be listed on 25th October, 2021. In the meanwhile, the first suit which was listed on 25th October, 2021 got adjourned to 12th November, 2021. Subsequently, another urgent request for listing of the present suit was made by the plaintiff on 8th November, 2021, requesting that the present suit be listed for hearing on 12th November, 2021 along with the first suit. A copy of the suit was served by the counsel for the plaintiff on the counsel for the defendants on 11th November, 2021. Yet, the present suit was not listed by the Registry on 12th November, 2021. The first suit that was listed on 12th November, 2021 was adjourned for 25th November, 2021 at the request of the counsel for the defendant no.13. In view of the fact that the present suit was not listed on CS(OS) 589/2021 SignaturePage Not Verified 61 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 12th November, 2021, the matter was mentioned by the counsel for the plaintiff for urgent listing before the acting Judge In-Charge (Original Side). The said mentioning was allowed, and the present suit got listed on the same date i.e., 12th November, 2021.
72. Counsels for the defendants were not present when the present suit was listed and after hearing the counsel for the plaintiff, this Court was pleased to pass an ex-parte ad interim injunction order. It appears that the counsel for the plaintiff pointed out the fact of the first suit being pending to the Court and this is how, while issuing summons in the present suit, the next date of hearing given was 25th November, 2021, which was the date to which the first suit was adjourned.
73. In view of the facts narrated above, I am of the view that the intention of the plaintiff, throughout, was to have the present suit listed along with the first suit and there was no intention to conceal the first suit. Advance copies of the present suit were duly served upon the counsels for the defendants on 22nd October, 2021 as well as 11th November, 2021. Despite the attempts of the counsels for the plaintiff to get the present suit listed on 12th November, 2021, the Registry did not list the same. Therefore, the present suit was mentioned by the plaintiff before the acting Judge In-Charge (Original Side) and the present suit was listed for the same date in the post-lunch session, when the ex-parte ad interim injunction was passed in the absence of the counsels for the defendants. It is not clear as to whether or not the counsels for the plaintiff gave any notice to the counsels for the defendants about the mentioning of the suit on 12th November, 2021 or about the mentioning being allowed and the suit being listed on the same date. If the said notice CS(OS) 589/2021 SignaturePage Not Verified 62 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 was not given by the counsels for the plaintiff to the counsels for the defendants, it would amount to lapse. But on the basis of a wrong mentioning by the counsel, the plaintiff cannot be penalized. Moreover, at this stage, when I have heard detailed submissions of the counsels for the parties on the merits of the matter at length and in respect of the application under Order XXXIX Rules 1 and 2 of the CPC along with the applications filed under Order XXXIX Rule 4 of the CPC, the ad interim injunction cannot be vacated only on account of the aforesaid lapse on behalf of the plaintiff's counsel.
74. Senior counsel appearing on behalf of the defendant no.13, in support of his submissions in respect of concealment has relied upon the judgments in Satish Khosla v. Eli Lilly Ranbaxy Ltd., 1997 SCC OnLine Del935; K. Jayaram & Ors. v. Bangalore Development Authority & Ors., 2021 SCC OnLine 1194 and Ambalal Sarabhai Enterprise Ltd. v. KS Infraspace LLP Limited and Anr., (2020) 15 SCC 585, wherein it is stated that in matters concerning grant of injunction, conduct of the party seeking injunction has to be considered.
75. In Satish Khosla (supra), a Division Bench of this Court, relying upon the judgment of the Supreme Court in S.P. Chengalvaraya Naidu v. Jagannath & Ors., (1994) 1 SCC 1 observed that the plaintiff approaching the Court for grant of injunction must disclose the pendency of the earlier litigation between the parties. It was further observed that not disclosing the plaint filed in the earlier suit and the fact that the plaintiff had not obtained injunction in the previous suit amounts to playing fraud on the Court. As I have already observed above, the plaintiff had duly disclosed the filing of CS(OS) 589/2021 SignaturePage Not Verified 63 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 the earlier suit, even though the said suit was filed on behalf of the defendants no.1, wherein the plaintiff was arrayed a party. Further, as is evident from the documents filed on behalf of the plaintiff, the intention of the plaintiff was that the present suit be listed with the first suit and therefore, the plaintiff was justified in not filing the pleadings filed on her behalf in the first suit. Therefore, the observations of the Division Bench would not be applicable in the facts and circumstances of the present case. It may also be relevant to point out here that in Satish Khosla (supra), the earlier suit had been filed by the same plaintiff, which is not the position in the present case.
76. In view of my observations hereinabove, there has been no deliberate/intentional concealment on behalf of the plaintiff that would disentitle her from the grant of relief of interim injunction in the present suit.
BAR ON JURISDICTION OF CIVIL COURT
77. It has been vehemently urged on behalf of the counsels appearing on behalf of the defendants no.4, 9 and 13 that the present suit is barred under Section 430 of the Companies Act, 2013. It is further contended that the relief sought in the present suit is essentially that of 'rectification of the Register', which lies in the exclusive domain of the NCLT. In support of this submission, reliance has been placed on the judgments in Jaiveer Singh Virk v. Sir Sobha Singh & Sons Pvt. Ltd., 2020 SCC Online Del 498; SAS Hospitality Pvt. Ltd. v. Surya Constructions Pvt. Ltd., 2019 212 Comp Cas 102 and Shashi Prakash Khemka v. NEPC, (2019)18 SCC 569.
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78. On the other hand, it has been submitted on behalf of the plaintiff that the challenge in the suit is to the transfer of shares made in favour of the defendants no.4 and 9 and not rectification of the Register. In this regard, attention of the Court is drawn to the prayers in the suit. Rectification of Register would only be a subsequent step after the question of title and ownership of the shares is decided.
79. Senior counsel appearing on behalf of the plaintiff has relied on the following paragraphs of the following judgments in furtherance of his submissions:
(i) Jai Mahal Hotels Pvt. Ltd. v. Devraj Singh and Ors., (2016) 1 SCC 423 "16. In Ammonia [(1998) 7 SCC 105], the scope of jurisdiction of the Company Court to deal with an issue of rectification in the Register of Members maintained by the Company was considered.
Following Public Passenger Service Ltd. v. M.A. Khadar [AIR 1966 SC 489] , it was held that jurisdiction under Section 155 was summary in nature. If for reasons of complexity or otherwise, the matter could be more conveniently decided in a suit, the Court may relegate the parties to such remedy. Subject to the said limitation, jurisdiction to deal with such matter is exclusively with the Company Court. It was observed: (Ammonia case [(1998) 7 SCC 105] , SCC p. 122, para 31) "31. ... It cannot be doubted that in spite of exclusiveness to decide all matters pertaining to the rectification it has to act within the said four corners and adjudication of such matters cannot be doubted to be summary in nature. So, whenever a question is raised the court has to adjudicate on the facts and circumstances of each case. If it truly is rectification, all matters raised in that connection should be decided by the court under Section 155 [Ed.:
Corresponding to Section 111 of the present Act, before its CS(OS) 589/2021 SignaturePage Not Verified 65 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 amendment by Act 31 of 1988.] and if it finds adjudication of any matter not falling under it, it may direct a party to get his right adjudicated by a civil court. Unless jurisdiction is expressly or implicitly barred under a statute, for violation or redress of any such right the civil court would have jurisdiction."
17. Thus, there is a thin line in appreciating the scope of jurisdiction of the Company Court/Company Law Board. The jurisdiction is exclusive if the matter truly relates to rectification but if the issue is alien to rectification, such matter may not be within the exclusive jurisdiction of the Company Court/Company Law Board.
18. In Standard Chartered Bank [(2006) 6 SCC 94], scope of Section 111(7) was considered. It was observed that jurisdiction being summary in nature, a seriously disputed question of title could be left to be decided by the civil court. It was observed:
(SCC p. 115, para 29) "29. ... The nature of proceedings under Section 111 is slightly different from a title suit, although, sub-section (7) of Section 111 gives to the Tribunal the jurisdiction to decide any question relating to the title of any person who is a party to the application, to have his name entered in or omitted from the register and also the general jurisdiction to decide any question which it is necessary or expedient to decide in connection with such an application. It has been held in Ammonia Supplies Corpn. (P) Ltd. v. Modern Plastic Containers (P) Ltd. [(1998) 7 SCC 105] that the jurisdiction exercised by the Company Court under Section 155 of the Companies Act, 1956 (corresponding to Section 111 of the present Act, before its amendment by Act 31 of 1988) was somewhat summary in nature and that if a seriously disputed question of title arose, the Company Court should relegate the parties to a suit, which was the more appropriate remedy for investigation and adjudication of such seriously disputed question of title."
(ii) Aruna Oswal v. Pankaj Oswal, (2020) 8 SCC 79 CS(OS) 589/2021 SignaturePage Not Verified 66 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 "21. Admittedly, Respondent 1 is not holding the shares to the extent of eligibility threshold of 10% as stipulated under Section 244 in order to maintain an application under Sections 241 and
242. He has purchased the holding of 0.03% in M/s Oswal Agro Mills Ltd. in June 2017 after filing civil suit and remaining 9.97% is in dispute, he is claiming on the strength of his being a legal representative. In M/s Oswal Greentech Ltd., the shareholding of the deceased was 11.11%, out of which one-fourth share is claimed by Respondent 1. Admittedly, in a civil suit for partition, he is also claiming a right in the shares held by the deceased to the extent of one-fourth. The question as to the right of Respondent 1 is required to be adjudicated finally in the civil suit, including what is the effect of nomination in favour of his mother Mrs Aruna Oswal, whether absolute right, title, and interest vested in the nominee or not, is to be finally determined in the said suit. The decision in a civil suit would be binding between the parties on the question of right, title, or interest. It is the domain of a civil court to determine the right, title and interest in an estate in a suit for partition.
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25. In view of the aforesaid decision in Sangramsinh P. Gaekwad case [Sangramsinh P. Gaekwad v. Shantadevi P. Gaekwad, (2005) 11 SCC 314] , we are of the opinion that the basis of the petition is the claim by way of inheritance of 1/4th shareholding so as to constitute 10% of the holding, which right cannot be decided in proceedings under Sections 241/242 of the Act. Thus, filing of the petition under Sections 241 and 242 seeking waiver is a misconceived exercise, firstly, Respondent 1 has to firmly establish his right of inheritance before a civil court to the extent of the shares he is claiming; more so, in view of the nomination made as per the provisions contained in Section 71 of the Companies Act, 2013.
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31. We refrain to decide the question finally in these proceedings concerning the effect of nomination, as it being a civil dispute, cannot be decided in these proceedings and the decision may CS(OS) 589/2021 SignaturePage Not Verified 67 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 jeopardise parties' rights and interest in the civil suit. With regard to the dispute as to right, title, and interest in the securities, the finding of the civil court is going to be final and conclusive and binding on parties. The decision of such a question has to be eschewed in instant proceedings. It would not be appropriate, in the facts and circumstances of the case, to grant a waiver to the respondent of the requirement under the proviso to Section 244 of the Act, as ordered by NCLAT."
(iii) Bakshi Faiz Ahmad v. Bakshi Farooq Ahmad, (2018) 211 Comp Cas 340 "35. Qua applicability of provisions of Companies Act, 2013, it is well settled law that a serious question of fraud and collusion cannot be decided by the Tribunal in a summary proceeding. Given the relief solicited for by respondent no. 1 in the Suit for Declaration, Partition and Injunction, the Tribunal has no power to decide the title of the shares in summary proceedings. Section 58 of the Companies Act, provides that rectification of register of members has to be decided by Tribunal and as per Section 430, the Civil Court has no jurisdiction. At the same time, it is also a trite law that Tribunal has a power only to decide the issue of rectification of register of members and has no power to decide the issue of title. It is apt to mention here that as per Section 111A of the Companies Act, 1956, the Company Law Board was empowered to decide the issue of title also. The word 'title' has not been included in Section 58 of the Companies Act, 2013. Even while considering Section 111A, it was held by the Supreme Court that a seriously disputed question of title cannot be decided by the Company Court or Company Law Board. This conclusion was arrived at by the Supreme Court by taking into consideration jurisdiction of the Company Law Board being summary in nature. The procedure in National Company Law Tribunal constituted under the Companies Act, 2013, is also summary in nature.
36. From the provisions of Companies Act, 2013 and 1956, it is clear that Tribunal, or Board as the case may be, can decide only rectification of register concerning shares and connected CS(OS) 589/2021 SignaturePage Not Verified 68 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 incidental issues and matters therewith and not disputed questions of title. In the present case, a bare perusal of averments in the plaint as well as the relief sought for by respondent no. 1 shows that to decide the issue raised by him vis-à-vis share(s)/title of the property in question is a disputed question of title, which can be decided by the Civil Court and the Tribunal/Company Law Board has no power to adjudicate the said issue. The Supreme Court in Ammonia Supplies Corporation (PT) Limited v. Modern Plastic Containers (P) Ltd., (1998) 7 SCC 105, the scope of jurisdiction of the Company Court to deal with an issue of rectification in the Register of Members maintained by the Company was considered. Following Public Passenger Service Limited v. M.A. Khadar, AIR 1966 SC 489, it was held that jurisdiction under Companies Act, was summary in nature. If for reasons of complexity or otherwise, the matter could be more conveniently decided in a suit. In Standard Chartered Bank v. Andhra Bank Financial Services Limited, (2006) 6 SCC 94, it was observed that jurisdiction of Tribunal being summary in nature, a seriously disputed question of title could be left to be decided by the civil court as same being more appropriate remedy for investigation and adjudication of such seriously disputed question of title. In Luxmi Tea Company Limited v. Pradip Kumar Sarkar, 1989 Supp (2) SCC 656, it was observed that a company did not have any discretion in rectifying its register except to require the procedure being followed.
37. Seriously disputed question of title, the Supreme Court has held, cannot be decided by the Company Law Board inasmuch as the proceeding before Tribunal constituted under Companies Act 2013 is summary in nature and seriously disputed questions cannot be decided by Tribunal. Even if the proceeding is initiated in Tribunal, the seriously disputed questions have to be relegated to the Civil Court. If the question arises for the title of a person, in whose favour the shares are to be transferred, adjudication power may not be available to the Tribunal to exercise power under Section 58 of the Act of 2013. [See : Jai Mahal Hotels Private Limited v. Devraj Singh, (2016) 1 SCC 423; Union of India v. R. Gandhi, the President, Madras Bar Association, 2010 (6) SCR 857; and K. Ravinder Reddy v. Alliance Business School, CS(OS) 589/2021 SignaturePage Not Verified 69 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 (2016) 198 CompCas 481 (Kar)]. Insofar as judgements cited and relied upon by learned counsel for petitioner are concerned, the same are distinct and distinguish from the facts and circumstances of the present case."
80. An analysis of the aforesaid judgments reveals that the exclusive jurisdiction vested with the erstwhile Company Law Board (CLB)/NCLT is only in respect of rectification of the Register. However, the right, title and interest in the shares can only be determined in a civil suit. The decision of the Civil Court would be final and conclusive in respect of right, title and interest in the shares. It has been consistently held by courts that the jurisdiction of the CLB/NCLT is summary in nature and therefore, complex issues with regard to right, title and interest in shares cannot be decided by the CLB/NCLT. These issues would require detailed evidence.
81. The Court in Bakshi Faiz Ahmad (supra), following the judgment of the Supreme Court in Ammonia Supplies Corporation (P) Ltd. v. Modern Plastic Containers Pvt. Ltd. and Ors., (1998) 7 SCC 105 and Jai Mahal Hotels (supra), also noted that under Section 111/111A of the Companies Act, 1956 (Old Companies Act) the CLB was empowered to decide the issue of title also, however, the word 'title' omitted in Section 58 of the Companies Act, 2013 (New Companies Act).
82. In the present case, there is a serious dispute with regard to the right, title and interest in the shares of the various defendant companies/LLPs. The plaintiff has contended that in terms of the Will dated 26th March, 2004, she only had a limited interest in the estate and could not have transferred the shared to the defendants no.4 and 9. The plaintiff has further contended that she was forced to transfer her shares in favour of the defendants no.4 and 9 CS(OS) 589/2021 SignaturePage Not Verified 70 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 on account of undue influence exercised on her by the said defendants. Besides, there are also allegations of her signatures being forged by the aforesaid defendants. A bare perusal of the prayers made in the suit would also demonstrate that the main reliefs have been claimed against the defendants no.4 and 9 and not against the defendant no.13. The challenge in the suit is in respect of the transfers made in favour of the defendants no.4 and 9. In my view, these are complex issues of fact and law, and which can only be decided by a Civil Court and not by the NCLT.
83. Now, I proceed to deal with the judgments cited on behalf of the defendants no.4, 9 and 13. In Jaiveer Singh Virk (supra), the Court was dealing with a case where reliefs in the plaint were based on the resolutions passed by the company. In other words, the plaintiff was seeking to enforce the resolutions passed by the company. It was not a case of inheritance or a case involving disputed title to the shares and therefore, the said case would not be applicable to the facts of the present case.
84. The observations of the Supreme Court in Shashi Prakash Khemka (supra) were not in the context of disputed title to the shares or whether there were any complex issues of fact and law involved in determining the title of the shares. Therefore, the said judgment would be of no assistance to the defendants no.4, 9 and 13. Similarly, in SAS Hospitality (supra), the challenge before the Court was in respect of allotment of shares in favour of some of the defendants. This case also does not deal with complex disputed questions of title in respect of shares and therefore, would not be of any assistance to the defendants no.4, 9 and 13.
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85. It is also relevant to note here that the reliefs sought in the suit are also in respect of the defendants no.14 and 17, which are LLPs and in respect whereof, the NCLT does not have the jurisdiction to deal with the issues raised in the suit.
86. In light of the discussion above, I am of the prima facie view that this Court has the jurisdiction to entertain the present suit.
CONCLUSION
87. In view of the discussion above, my prima facie findings may be summarized as under:
(i) Under the Will dated 26th March, 2004, the plaintiff had only a limited beneficial interest in the estate of late Sh. Devinder Chaudhary, which did not culminate into an absolute interest under Section 14(1) of the Hindu Succession Act.
(ii) There is a doubt whether the Will dated 26th March, 2004 is the last and final will of the late Sh. Devinder Singh Chaudhary, as the defendant no.2 has propounded a Will dated 2008, in respect of which, probate proceedings are pending.
(iii) Therefore, the plaintiff could not have transferred the shareholding and interest in the estate of late Sh. Devinder Singh Chaudhary in favour of the defendants no. 4 and 9.
(iv) The transfers of shares/interest in the defendant companies/LLPs made in favour of the defendants no. 4 and 9 by the plaintiff were on account of undue influence exercised by the defendants no. 4 and 9 CS(OS) 589/2021 SignaturePage Not Verified 72 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 over the plaintiff. Therefore, there a doubt is created in respect of the title of the defendants no. 4 and 9 over the shares/interest in the defendant companies/LLPs, transferred by the plaintiff.
(v) The various defendant companies/LLPs are nothing but alter egos of the defendants no. 4 and 9 and in the nature of quasi-partnerships. Therefore, following the ratio of Sangramsinh P. Gaekwad (supra), this Court is entitled to restrain the aforesaid companies/LLPs from disposing of their immovable properties.
(vi) Various loans have been taken and unauthorized transfers made from the defendant companies/LLPs and other family-owned companies/LLPs in favour of the defendants no. 4 and 9. These have been used to acquire properties/assets in their own names.
(vii) Various properties of late Sh. Devinder Singh Chaudhary/plaintiff and the defendant companies/LLPs have been disposed of or attempted to be disposed of by the defendants no. 4 and 9 after acquiring control of these companies/LLPs.
88. In view of the above, the plaintiff has made out a prima facie case in her favour for grant of interim injunction. Balance of convenience requires that the properties in the names of the defendant companies/LLPs are preserved and the defendants no. 4 and 9 are restrained from disposing of the said properties held by the defendant companies/LLPs on the basis of the shareholding/interest acquired by the defendants no. 4 and 9 in the aforesaid companies/LLPs till the final adjudication of the suit. Further, the defendants no. 4 and 9 should also be restrained from selling or disposing of CS(OS) 589/2021 SignaturePage Not Verified 73 of 75 Digitally Signed By:AMIT BANSAL Signing Date:29.07.2022 12:24:58 immovable properties acquired by them till the final adjudication of the suit. Irreparable harm and injury would be caused to the plaintiff as well as other legal heirs of the plaintiff and late Sh. Devinder Singh Chaudhary if the assets/properties belonging to the defendant companies/LLPs are frittered away by the defendants no. 4 and 9 during the pendency of the present suit. Ultimately if the Court decrees the suit in favour of the plaintiff and the assets/properties of the defendant companies/LLPs have been alienated or sold, the decree would be rendered otiose.
89. Consequently, an interim injunction is passed in favour of the plaintiff and against the defendants in the following terms:
(i) No third party interest, including sale, transfer and encumbrance, shall be created in respect of the properties owned by the defendants no. 13 to 17;
(ii) The defendant no. 4 and 9 are restrained from transferring, selling, alienating and creating third party interest in the properties, being property/office in Building No.7, Basantlok, Vasant Vihar, New Delhi; flat at Magnolia, Gurgaon; accommodation on the first and second floor of Tower B, Magnum Towers, Golf Course Extension Road, Sector 58, Gurgaon; factory land and building at Village Khanpur purkazi Laksar Road, Dist. Uttarakhand-247663.
(iii) The aforesaid directions shall not come in the way of the defendant no.13 selling/transferring plots developed in Madhuban Colony situated in Rajpura, Punjab.
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90. Accordingly, the interim order dated 12th November, 2021 stands modified to the extent hereinabove. I.A. 14829/2021 succeeds and I.A. 15075/2021, I.A. 15080/2021 and I.A. 15081/2021 are dismissed.
91. Needless to state, any observations made herein are only for the purposes of deciding the present applications and would have no bearing on the final adjudication of the suit.
AMIT BANSAL, J.
JULY 29, 2022
dk/sr/at
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