Delhi High Court
Mrs. Karmawali And Anr. vs Shri Harpreet Singh Batra And Ors. on 4 December, 2006
Author: Pradeep Nandrajog
Bench: Pradeep Nandrajog
JUDGMENT Pradeep Nandrajog, J.
1. The above captioned application has been filed by defendants No. 1 to 12 praying that the suit be dismissed; alleging that the suit is an abuse of the process of law; that the suit is based on motivated falsehood; that there is suppression of material facts and documents.
2. Shri Amit S. Chadha, learned senior counsel appearing for defendants No. 1 to 11 fairly conceded at the Bar during arguments that Order 7 Rule 11 of the Code of Civil Procedure was not being invoked. Inherent power of the Court was sought to be invoked.
3. To appreciate the rival contentions of the parties, a brief resume of the case pleaded in the plaint and the grounds on which dismissal of the plaint is sought for may be noted.
4. Suit is for declaration and permanent injunction. Smt. Karmawali and her son Rajinder Kumar are the plaintiffs.
5. They state that they are the directors of a company called M/s. Good Health Accessories (India) Pvt. Ltd. which was incorporated in the year 1994.
6. That they are the wife and son respectively of late Shri Tilak Raj, who, as member of an industrial society named Surgical Cooperative Industrial Society Ltd., was allotted plot No. B-61, Okhla Industrial Area, Phase-I, New Delhi. That dispute pertaining to the price which could be charged for the plot became a subject matter of litigation between the cooperative society and DDA. Issue attained finality when Civil Appeal No. 6668/1998 was decided by the Supreme Court vide order dated 16.8.1993 directing DDA to charge 50% of the market rate and allot plots to the members of the society.
7. It is further stated that when issue pertaining to price to be charged was being litigated, Tilak Raj expired on 23.11.1982. He had nominated Smt. Karmawali as his nominee in respect of the plot in question. She sought mutation. DDA allowed mutation on 26.8.1996. She applied to DDA for transfer of the plot in favor of M/s. Good Health Accessories (India) Pvt. Ltd. of which she and plaintiff No. 2 were the directors. DDA accorded transfer and conveyed the same on 11.9.1996.
8. That plaintiffs arranged for funds and on 3.12.1996 paid Rs. 54,40,922.60 to DDA as price of the plot.
9. That on 30.9.1998 DDA demanded interest for late payment. Sum of Rs. 23,25,495/- was demanded by DDA. A writ petition was filed seeking quashing of the said demand raised by DDA. That at the time when suit was filed, arguments had concluded in the writ petition filed and judgment was awarded.
10. It is stated by the plaintiffs that during pendency of the writ petition, defendants No. 1 to 11 forged the signatures of the plaintiffs on various documents and started asserting a right to manage the company M/s. Good Health Accessories (India) Pvt. Ltd. That defendants No. 1 to 11 forged signatures of the plaintiffs on form No. 32 and submitted the same to the Registrar of Companies evidencing that they have been appointed directors of the company on 21.3.2003.
11. It is stated by the plaintiffs that the only asset of the company was the plot allotted by DDA. This was allotted to late Shri Tilak Raj. By forging documents pertaining to the affairs of the company, defendants No. 1 to 11 were attempting to usurp the plot allotted by DDA to Tilak Raj, which allotment was transferred in the name of M/s. Good Health Accessories (India) Pvt. Ltd.
12. Before dealing with the facts projected by the defendants on basis whereof the present application was argued, an intervening event after suit was filed may be noted at the outset.
13. During summer vacations, in the year 2005, on 20.6.2005, IA No. 4795/2005 was filed apparently recording a settlement between the parties. In terms of the settlement set out in the said application, suit was decreed on 20.6.2005.
14. Thereafter plaintiffs filed applications stating that their signatures were forged on the compromise application. Statement of plaintiff No. 2 was recorded. Before the said application could be decided, on 13.7.2006, defendants made a statement that they have no objection if the consent decree was withdrawn and suit was restored.
15. Accordingly, vide order dated 13.7.2006, consent decree was recalled. Suit was restored to its original position.
16. IA No. 195/2005 which was pending at the time when suit was disposed of was thus restored and was taken up for consideration.
17. In between the disposal of the suit pursuant to the compromise and its restoration, a suit registered as CS(OS)No. 1255/2005 was filed by M/s. Pratham Apartments Pvt. Ltd. and Mr. Anil Pahwa claiming that under documents executed by the plaintiffs they were majority share-holders of M/s. Good Health Accessories (India) Pvt. Ltd. holding 4,28,470 shares and therefore they pleaded that the plaintiffs could not enter into any compromise in the present suit with the defendants of the present suit.
18. It would not be irrelevant to note that the instant suit has been filed by Manoj K. Singh, Advocate on behalf of the plaintiffs and CS(OS)No. 1255/2005 was filed by Neeraj Kumar Singh, Advocate who is the younger brother of Manoj K. Singh.
19. One thing emerges at the outset. Manoj K. Singh and Neeraj K. Singh are acting in a most unprofessional manner.
20. In CS(OS)No. 1255/2005 an issue cropped up as to who should act on behalf of M/s. Good Health Accessories (India) Pvt. Ltd. to obtain possession of the plot from DDA. On 30.3.2006 statements of present plaintiffs were recorded in said suit. Karmawali and Rajinder Kumar admitted that entire premium for the plot was paid to DDA by Batras (defendants No. 1 to 11), a stand contrary to what has been pleaded in the plaint. Further, Rajinder Kumar admitted that Batras had engaged a lawyer and had spent money in litigating with DDA, again a stand contrary to what has been pleaded in the plaint. Further, Karmawali admitted that she and her son had been taking money from Batras from time to time. Rajinder Kumar admitted execution of some documents in favor of Batras i.e. defendants No. 1 to 11.
21. Following is the case projected by defendants while arguing IA No. 195/2005:
(a) In his capacity as member of Surgical Cooperative Industrial Estate Ltd. on 4.1.1972 DDA allotted plot No. B-61, Okhla Industrial Area, Phase-I, New Delhi to late Shri Tilak Raj who died on 13.11.1982 before possession could be handed over. Plaintiff No. 1 sought substitution as legal heir of Tilak Raj and the society accepted her as Tilak Raj's nominee.
(b) DDA cancelled entire allotment made to the members of Surgical Cooperative Industrial Estate Ltd. Litigation ensued and was finally decided by the Supreme Court on 16.8.1993 directing DDA to allot plots to the members of the society at 50% of the market price.
(c) In the year 1993 Smt. Karmawali executed an agreement to sell with one G.S. Arora and one Prem Chawla in respect of the plot in question and received part sale consideration.
(d) On 17.6.1994 Karmawali entered into an agreement to sell with defendants No. 1 to 11 agreeing to sell plot No. B-61, Okhla Industrial Area, Phase-I, New Delhi for a total sale consideration of Rs. 72.6 lacs. G.S. Arora and Prem Chawla signed the said agreement as confirming parties. Defendants No. 1 to 11 paid money to G.S. Arora and Prem Chawla to satisfy their claim under the agreement to sell entered into between them and Karmawali.
(e) To give effect to the transfer of the plot to defendants No. 1 to 11 it was agreed between Karmawali and her son Rajinder Kumar that M/s. Good Health Accessories (India) Pvt. Ltd. would be incorporated with Karmawali and Rajinder Kumar as directors. Karmawali would request DDA to transfer allotment of the plot in name of the company and thereafter shares of the company would be transferred to defendants No. 1 to 11. Premium for the plot would be paid by defendants No. 1 to 11.
(f) In furtherance of the said agreement, M/s. Good Health Accessories (India) Pvt. Ltd. was incorporated on 7.7.1994. On 18.8.1994 Karmawali requested DDA to transfer allotment in the name of M/s. Good Health Accessories (India) Pvt. Ltd. By way of additional security to effectuate transfer of the plot in favor of M/s. Good Health Accessories (India) Pvt. Ltd., on 25.7.1994 Karmawali executed an agreement with said company agreeing to transfer the plot to the company. On behalf of the company, plaintiff No. 2, Rajinder Kumar signed the same in his capacity as a director.
(g) Turning dishonest, on 18.8.1995 Karmawali executed an agreement to sell the plot in question in favor of M/s. Modi International. She received Rs. 1 lac towards earnest money.
(h) Mulakh Raj, brother of late Shri Tilak Raj filed a civil suit registered as Suit No. 226/1995 in the Court of the Civil Judge, Delhi claiming share in the plot.
(i) On 6.9.1995 Karmawali received Rs. 1 lac from M/s. Seth Fashion House, controlled by G.S. Arora and Prem Chawla to further encumber the plot. On 8.6.1996 she received another Rs. 15,000/- from Mr. K.K. Modi acting on behalf of M/s. Modi International.
(j) Since Karmawali had entered into multiple agreements with three parties agreeing to sell the plot to the said three parties and even Mulakh Raj had a claim to the plot, defendants No. 1 to 11, between 1.8.1996 to 7.8.1996 settled the various claims of third parties and paid various amounts to them. Memorandum of Understanding and agreements were executed. The details are as follows:
(i) On 1.8.1996 a Memorandum of Understanding was executed between Karmawali, K.K. Modi, G.S. Arora, Prem Chawla and B.R. Wadhwa recording acts to be done to satisfy the claims of all third parties. On same date Karmawali entered into a fresh agreement to sell with Harpreet Singh Batra and Baljeet Singh, defendants No. 1 and 2. Rs. 9 lacs was paid to K.K. Modi and B.R. Wadhwa by defendants No. 1 and 2 and documents executed by Karmawali in their favor were recorded as cancelled. Similarly Rs. 14 lacs was paid to G.S. Arora and Prem Chawla by defendants No. 1 and 2 and documents executed by Karmawali in their favor were recorded as cancelled. Rs. 14.5 lacs were agreed to be paid to Karmawali out of which Rs. 5 lacs was paid in cash and for the remaining amount 3 post dated cheques were issued in name of Karmawali.
(ii) Simultaneously, on 5.8.1996 Karmawali executed general power of attornies, special power of attornies and a will in favor of the nominees of defendants No. 1 and 2.
(iii) Suit No. 226/1995 was got settled in terms of the Memorandum of Understanding dated 1.8.1996. Application under Order 23 Rule 3 CPC was filed under signatures of, amongst others, Karmawali. Mulakh Raj received Rs. 5 lacs. Recording the settlement, Suit was disposed of.
(k) Yet again, Karmawali turned dishonest. On 18.8.1996 she executed another agreement to sell the plot in question to one Shri Joginder Seth of M/s. Seth Fashion House.
(l) Since Rs. 54,40,922.60 had to be paid to DDA as the premium for the plot as demand was raised by DDA on 14.11.1996, on 29.11.1996, Dalip Singh father of defendant No. 1, defendant No. 2 and M/s. Fateh Overseas Pvt. Ltd. a company controlled by defendants No. 1 to 11 transferred Rs. 25 lacs, Rs. 14.5 lacs and Rs. 15 lacs respectively in the account of M/s. Good Health Accessories (India) Pvt. Ltd. On same date, from said account of the company payment in sum of Rs. 54,40,922.60 was made to DDA.
(m) On 12.2.1997, defendants No. 1 to 11 learnt about the agreement entered into between Karmawali and M/s. Seth Fashion House. To free the property the rigors of litigation with M/s. Seth Fashion House, defendants No. 1 to 11 paid money to M/s. Seth Fashion House and a compromise deed was executed on 20.2.1997 recording satisfaction of the claim of M/s. Seth Fashion House.
(n) Plaintiffs turned dishonest and cancelled the general power of attornies and the will executed by plaintiff No. 1 on 5.8.1996. This was a ploy to extract more money. On 6.6.2001 after receiving further money, plaintiffs executed fresh irrevocable general power of attorney and special power of attorney.
(o) Since DDA had raised a demand for interest on the sum of Rs. 54,40,922.60 a writ petition being WP(C)No. 5509/1998 was filed on behalf of M/s. Good Health Accessories (India) Pvt. Ltd. to challenge the demand towards interest. Lawyer was engaged by defendants No. 1 to 11.
(p) Yet again, Karmawali turned dishonest. She executed an agreement with one Pawan Khanna on 4.1.2004 to sell the plot to him. On 4.5.2004, through Manoj K. Singh, Advocate, Pawan Khanna sought intervention to prosecute the writ petition on behalf of M/s. Good Health Accessories (India) Pvt. Ltd.
(q) That on 27.8.2004, plaintiff No. 2 resigned from the board of directors of M/s. Good Health Accessories (India) Pvt. Ltd. Form-32 was filed before the Registrar of Companies. On 27.9.2004, Karmawali resigned from the board of directors of the company.
(r) The present Suit was filed on 29.11.2004 through Manoj K. Singh, Advocate on totally false allegations.
22. Shri Amit S.Chadha, learned senior counsel for defendants No. 1 to 11, inter alia urged that motivated falsehood and abuse of the process of the law was evident on the face of the plaint for the reason assertion in the plaint that the plaintiffs were prosecuting the writ petition filed against DDA challenging demand towards interest is patently false inasmuch as record of said writ petition shows that defendants No. 1 to 11 were prosecuting the said petition. Learned senior counsel urged that there was a gross suppression of material facts, in that plaintiffs had not disclosed about the facts noted by me in para 21 above. That they had withheld information regarding litigation pertaining to the plot by brothers of late Shri Tilak Raj. That plaintiffs had withheld vital information regarding monies paid by the defendants No. 1 to 11 to said parties to satisfy their claims in respect of the plot which was allotted by DDA to late Shri Tilak Raj, later on assigned to M/s. Good Health Accessories (India) Pvt. Ltd.
23. Various documents stated to have been executed by the defendants were relied upon to urge that plaintiffs had not uttered a word regarding said documents. Counsel urged that payments made to third parties were by cheques. It was preposterous to believe that plaintiffs would not be aware of satisfaction of claim of third parties which claims were created by acts of the plaintiffs. Counsel urged that there is a gross suppression of material facts by the plaintiffs.
24. In particular statements of the plaintiffs recorded on 30.3.2006 in CS(OS)No. 1255/2005 were relied upon by learned Counsel wherein, contrary to the pleadings in the present suit that they had paid premium to DDA, plaintiffs admitted that Batras (defendants No. 1 to 11) had paid the premium. Similarly, contrary to the assertions made in the plaint, plaintiff No. 2 admitted that Batras had financed the litigation against DDA. Counsel also relied upon the admission of the plaintiffs pertaining to para 37 of the present application. Counsel urged that plaintiffs have admitted that on 12.4.2001 they had caused to be served upon Batras a legal notice cancelling the general power of attorney and the will executed by Karmawali. Counsel urged that this evidenced knowledge of the plaintiffs vis-a-vis various documents executed by them from time to time. Counsel urged that plaintiffs deserve to be non-suited inasmuch as while pleading their case they have suppressed material facts.
25. Per contra, Shri V.K. Shali, learned Counsel for the plaintiffs urged that the suit can be dismissed by this Court only if it is believed by the Court that the defense set up in the written statement is genuine. Counsel urged that this would mean pre-judging the issues in favor of defendants No. 1 to 11 and against the plaintiffs.
26. Learned Counsel was at pains to emphasize that when Supreme Court decided that 50% of the market value be paid, DDA raised a demand of approximately Rs. 58 lacs. Total amounts, as per version of the defendants, assuming they were paid by defendants totalled Rs. 72 lacs. Counsel urged that it was impossible to believe that a plot having market value of over 1.16 crores would be sold for Rs. 72 lacs and that also payments paid over a period of time in a piecemeal manner.
27. Counsel urged that Order 7 Rule 11 of the Code of Civil Procedure was the only provision wherein a party could be non suited at the threshold. Counsel urged that where a field is legislated upon, inherent powers cannot be invoked by the Court.
28. Shri Amit S.Chadha, learned senior counsel for the defendants urged that this Court had ample inherent power, apart from the power under Order 7 Rule 11 CPC to reject frivolous Suits at the threshold. Counsel relied upon the following authorities:
(a) Mayar (HK) Ltd. v. owner & Parties Vessel MV Fortune Express
(b) Ram Chand & Sons Sugar Mills Pvt. Ltd. Barabanki v. Kanhayalal Bhargava and Ors.
(c) 1996 (5) SCC 560 Indian Bank v. Satyam Fibres (India) Pvt. Ltd.
(d) United India Insurance Co. Ltd. v. Rajender Singh and Ors.
(e) SJS Business Enterprises Pvt. Ltd. v. State of Bihar and Ors.
(f) Commissioner of Customs Kandla v. Essar Oil Ltd. and Ors.
g) 110 (2004) DLT 649 (SC) Shipping Corporation of India Ltd. v. Machado Bros. and Ors.
29. Save and except decision in Mayar HK Ltd. (Supra) other decisions relied upon are irrelevant at this stage of the proceedings. Decision in Ram Chand & Sons Sugar Mills' case (Supra) deals with the inherent powers of the Court in relation to procedural aspects to be followed in conduct of trials and whether Order 29 CPC binds the person named therein to act on behalf of the company and whether powers are available to a Court under Section 151 CPC in addition to the legislative enactment under Order 29 CPC. Decision in Indian Bank's case (Supra) and United Indian Insurance Co. (Supra) deal with inherent powers of a Court to recall decrees obtained by fraud. Likewise, decisions in SJS Business Enterprises (Supra) and Commissioner of Customs Kandla (Supra) deal with what constitutes a fraud. The last decision in Shipping Corporation of India's case (Supra) deal with inherent powers of a Court to bring to an end a Suit which has become infructuous.
30. None of the afore-noted decisions is applicable.
31. Mayar HK Ltd. (Supra) is an authority which has expanded the law and has explained that apart from provisions of Order 7 Rule 11 CPC, inherent powers can be invoked to nip in the bud a frivolous litigation.
32. But since the decision curtails the normal right of every litigant to establish through means of evidence, the case pleaded, the power recognized by the said authority has been limited, evidenced by the use of the following expressions:
(a) (Para 20) The suppressed fact must be a material one in the sense that had it not been suppressed it would have had an effect on the merits of the case. It must be a matter which was material for the consideration of the Court, whatever view the Court may have taken.
(b) (Para 25) To non-suit a plaintiff on the ground of abuse of process, the applicant must show that the plaintiff would not succeed but that he could not possibly succeed on the basis of the pleadings and in the circumstances of the case. Following observations in para 25 need to be noted in verbatim.
The power would be exercised by the court if the defendant could show to the court that the action impugned is frivolous, vexatious or is taken simply to harass the defendant or where there is no cause of action law or in equity. The power of the court restraining proceedings is to be exercised sparingly or only in exceptional cases. The stay of proceedings is a serious interruption in the right that a party has to proceed with the trial to get it to its legitimate end according to substantive merit of his case.
33. One's strength, sometimes, becomes the greatest weakness. The defendants have to explain the circuitous route adopted by them, if their case is accepted to prove the transaction. No doubt, plaintiffs have a lengthly explanation to render, but the documents relied upon by the defendants have to be confronted to the plaintiffs.
34. I had an occasion to witness the demeanor of plaintiff No. 2 when I recorded his statement in Court on 12.5.2006. Plaintiff No. 2 is a chronic alcoholic. He made incoherent and inconsistent statements. Statement of plaintiff No. 1 recorded in CS(OS)No. 1255/2005 by S.K. Kaul, J. on 30.3.2006 shows her utter illiteracy. A trial would therefore be needed to illicit circumstances under which the plaintiffs executed various documents.
35. Lest either party be prejudiced, and since trial has yet to be conducted, I refrain from expressing any opinion on the merits of the controversy projected by the applicants but must note one fact that it needs to be investigated as to why plaintiffs would agree to sell the plot for Rs. 72 lacs when admittedly its market value was more than Rs. 1 crore. I am referring to the market value at Rs. 1 crore in light of the admitted position between the parties that pursuant to directions of the Supreme Court that plots be allotted by DDA to members of the Surgical Cooperative Industrial Estate Ltd. at 50% of the market value, the plot in question was allotted in the year 1993 at a premium of Rs. 54,40,922/-.
36. I need not be understood to have expressed any opinion on the merits of the controversy. Views expressed are questions which arise and require a further investigation. Needless to state final decision would be in light of the evidence led by the respective parties.
37. IA No. 195/2005 is accordingly dismissed. No costs.
CS(OS) No. 1358/20041. Replication be filed to the written statement within 4 weeks from today. Parties to file the original documents within 6 weeks from today.
2. List before the learned Joint Registrar for admission/denial on 19.2.2007.
3. Parties would appear before the learned Joint Registrar for admission/denial on said date. I direct plaintiffs to do admission/denial in person. If for some reasons plaintiffs cannot appear on 19.2.2007, learned Joint Registrar would be permitted to give one further opportunity but not beyond two weeks. Matter would thereafter be listed before Court for framing of issues.
4. I notify to the parties that trial of the Suit would be expedited. After issues are framed, matter would be set down for trial immediately. Evidence would be recorded on daily basis before a Court Commissioner appointed for recording evidence.