Delhi High Court
Jawahar Lal Nehru Hockey Tournament ... vs M/S. Radiant Sports Management Pvt. ... on 7 November, 2008
Author: A.K.Sikri
Bench: A.K.Sikri, Manmohan Singh
Unreportable
IN THE HIGH COURT OF DELHI AT NEW DELHI
+EFA (OS) No. 17/2008
Date of Decision: 07.11.2008
#Jawahar Lal Nehru Hockey Tournament Society .....Appellant
! Through: Mr.Pinaki Misra, Sr. Advocate
Mr.Sandeep Sharma and Mr.Vikas Sharma
Versus
$M/s.Radiant Sports Management (P) Ltd. ......Respondents
Through Mr.Anupam Srivastava
CORAM :-
*THE HON'BLE MR.JUSTICE A.K.SIKRI
THE HON'BLE MR. JUSTICE MANMOHAN SINGH
1.Whether Reporters of Local papers may be allowed to
see the Judgment?
2.To be referred to the Reporter or not?
3.Whether the judgment should be reported in the Digest?
A.K. SIKRI, J. (Oral)
:
1. The appellant is the decree holder, who is seeking to execute the decree to recover the amount awarded in its favour. For this purpose it filed Execution Petition No.38/2000 in this Court. In the said execution, property bearing No.S-524, Second Floor, Greater Kailash-I, New Delhi (hereinafter referred to as the 'disputed portion of the property') was attached in compliance to the orders dated 16.5.2000 passed by the learned Single Judge. As would be noted hereafter, the disputed portion of the property changed hands from one person to other. After the attachment, Court had put the property to auction EFA (OS) No.17/2008 Page 1 of 10 and at that stage, the respondent No.2 filed the objections stating that since he was the owner of the property and had nothing to do with the said decree, the property could not be sold in the execution. The learned Single Judge has accepted the objections of the respondent No.2 and allowed his objections vide orders dated 12.3.2008 imposing a cost of Rs.50,000/- upon the appellant/decree holder. In this appeal, we are concerned with the validity and/or propriety of the aforesaid orders passed by the learned Single Judge.
2. Few relevant facts, which would have bearing on the issued involved, may now be noted. The appellant herein had awarded a contract to the respondent No.1, M/s. Radiant Sports Management Pvt. Ltd.
(hereinafter referred to as the 'JD No.1'). Since certain disputes arose, as, according to the appellant, JD No.1 had to make certain payments, it invoked arbitration clause in the agreement between the parties. The matter was referred to the learned Arbitrator, who gave the Award in favour of the appellant herein as per which, the JD No.1 was to pay a sum of Rs.13,50,000/- along with interest @ 15% per annum. This Award was made rule of the Court and decree followed in terms of the Award as no objections were filed by any of the parties. This decree was not challenged any further and therefore, attained finality.
3. On the basis of the said decree, the appellant filed aforesaid Execution Petition no.38/2000. The appellant wanted attachment of certain properties in which it included property bearing No. S-524, Greater EFA (OS) No.17/2008 Page 2 of 10 Kailash-I, New Delhi alleging that the said property was in the name of JD No.1. The Court passed orders dated 16.5.2000 attaching the aforesaid property. JD No.1, as is evident from its name, is a private limited company. One Mr. Aushim Khetrapal is its Managing Director. At the time when the attachment order was passed, Mr.Khetrapal was residing in the disputed portion of the aforesaid property, which was in his occupation as a tenant. Other portions/flats in the said property are occupied by different persons and Mr.Khetrapal had no connection with those persons. Thus, at the time of execution of the warrants of attachment the Bailiff attached only the disputed portion of the property, which was in occupation of the Managing Director of the JD No.1, namely, Mr.Aushim Khetrapal.
4. After the service of notice in the execution petition and the execution of the warrants of attachment, Mr.Khetrapal appeared in the Court and gave assurances to the Court to the effect that he would liquidate the entire liability under the said decree by making payments in phased manner. Significantly, no objections were filed by him stating that he was only a tenant and was not the owner of the property. It would also be pertinent to mention that later on vide sale deed dated 4.1.2001 he (Aushim Khetrapal) purchased the property from the erstwhile owner jointly with his wife Mrs. Anita Khetrapal. Even after purchasing the said second floor of the property in his name he never raised any objection on the ground that such a property could not have EFA (OS) No.17/2008 Page 3 of 10 been attached as the decree was against a private limited company, which was separate legal entity. Instead, as pointed out above, he kept on giving promises to the Court that he would make the entire payment, which is clear from the following:-
5. On 27.9.2002 application under Section 151 of the Code of Civil Procedure on behalf of the judgment debtor was field supported by affidavit of Mr.Aushim Khetrapal as the Managing Director of the judgment debtor. In this application it was stated that the judgment debtor wanted to settle the matter with the decree holder and it was agreed between the parties that the judgment debtor would pay a sum of Rs.11 lakhs in full and final settlement, which offer was accepted by the decree holder as well. He gave two pay orders in the sum of Rs.1,54,000/- and Rs.1,44,000/- both dated 26.9.2002. He also handed over four post-dated cheques of Rs.2,00,000/- each. It was also mentioned in this application that those cheques would be honoured on presentation and if the cheques are dishonoured, entire decretal amount of Rs.23,88,565/- along with interest @ 15% per annum from 10.2.2000 till payment would become due and payable. In para 9 of the application, following stipulation was made:-
"9. That the judgment debtor further agrees and admits that till the entire payment in terms of the settlement above is pad to the decree holder he shall not sell, alienate, transfer or part with possession of the premises bearing No.S- 524, Greater Kailash-I, New Delhi and till payment of the last installment upto 10/10/02." EFA (OS) No.17/2008 Page 4 of 10
6. In his supporting affidavit Mr.Khetrapal, in addition to stating that he was the Managing Director of the judgment debtor, specifically affirmed on oath as under:-
"3. That I shall remain bound by the terms as stated in the accompanying application and in case of default shall also be personally liable to satisfy the decree."
Thus, he accepted that in case of default he would be personally liable to satisfy the decree.
7. All the four cheques given by the judgment debtor to the decree holder bounced and therefore, entire payment as per the decree after adjusting Rs.3,00,000/-, which were paid by means of pay orders, became due. In these circumstances, the Court passed the orders for sale of the aforesaid attached property.
8. When the proclamation of the sale was issued, the respondent No.2 approached the Court and raised objections stating that he was the bona fide purchaser of the disputed portion of the property and therefore, it could not be put to auction. We may only note that the auction was carried out as scheduled and bid of one Mr.Rajinder Singh Verma for Rs.35,60,000/- was accepted. Matter was taken up by the respondent No.2 to the Division Bench, but it would not be necessary to spell out the proceedings. Suffice it to state that ultimately the objections of the respondent No.2 were heard and decided in his favour vide impugned orders dated 12.3.2008 holding that the said EFA (OS) No.17/2008 Page 5 of 10 auction of the property as illegal and allowing the auction purchaser to withdraw the amount deposited by him along with interest paid on it.
9. Perusal of the order of the learned Single Judge would disclose that after the purchase of the property vide sale deed dated 4.1.2001 Mr.Khetrapal had sold this property to one Mr.Rahul Mullick vide sale deed dated 1.1.2002 and the respondent No.2 purchased the property in question from Mr.Rahul Mullick vide sale deed dated 19.12.2003. On this basis the learned Single Judge opined that the respondent No.2 was the bona fide purchaser of the property. It is also held by the learned Single Judge that since the decree is against the respondent No.1, which is a private limited company and thus, a distinct entity, there could not have been an attachment of the property, which was sold to Mr.Aushim Khetrapal and his wife Mrs.Anita Khetrapal on 4.1.2001. The learned Single Judge also held that in the facts of this case the doctrine of "lifting of corporate veil" would not apply. On this premise the conclusion arrived at by the learned Single Judge is that since the property did not belong to the judgment debtor, such a property could not have been sold in the execution.
10.We have heard the learned counsel for the parties at length and are of the view that the conclusion arrived at by the learned Single Judge is not correct in law as well as on facts. Few salient features of this case, which would become discernible and apparent from the facts narrated above, are the following:-
EFA (OS) No.17/2008 Page 6 of 10
a) Mr.Aushim Khetrapal was occupying the disputed portion of the property at the time when order of attachment dated 16.5.2000 was passed. No doubt, at that time he was only a tenant. However, this property was purchased in the joint names of Mr.Aushim Khetrapal and his wife on 4.1.2001 and therefore, he became co-owner of the said property on 4.1.2001. Thus, even when the order of attachment dated 16.5.2000 was irregular, it came to be regularized on 4.1.2001.
b) What is important is that he never raised any objection after the execution of the warrants of attachment that the property could not be attached as he and his wife were the owners of the said property whereas the judgment debtor was a company, namely, distinct legal entity.
c) His conduct, on the contrary, depicts otherwise. Not only he assured on behalf of the company as its Managing Director to make the payment for which purpose he negotiated with the decree holder and extracted huge concession inasmuch as though the amount payable under the decree was more than Rs.23 lakhs, the decree holder agreed to settle the case by accepting only Rs.11 lakhs.
d) Furthermore, another aspect which becomes significant and rather a clincher is that at the time of entering into EFA (OS) No.17/2008 Page 7 of 10 settlement he assured the decree holder as well as the Court in his application dated 27.9.2002 the following two things:-
(i) till the entire payment in terms of the settlement is paid to the decree holder, he shall not sell, alienate, transfer or part with possession of the suit property (which was lying under attachment);
(ii) he agreed, in no uncertain terms, that in case of default he shall also be personally liable to satisfy the decree.
e) It is clear that the decree holder acted upon the aforesaid assurances of Mr.Aushim Khetrapal and even the Court proceeded on the same basis because of which he could, for the time being, defer the consequences of attachment of the said property. It is also clear from the above that he virtually agreed that the aforesaid property would be available for satisfying the decree, in case of default and it is because of this reason that not only he agreed to be personally liable, but also not to sell, alienate, transfer or part with possession of the suit property.
11.These material facts, which would be decisive, have not been taken into account at all by the learned Single Judge while passing the impugned order. It is stated at the cost of repetition that the property was lying attached at that time and because of the aforesaid reasons, EFA (OS) No.17/2008 Page 8 of 10 particularly when there was no objection to the attachment orders and Mr.Khetrapal himself offered the said property as security, the attachment would be valid. Furthermore, when there was such an attachment order, which was not under challenge on any ground whatsoever at that particular time, it was not open to Mr.Khetrapal to sell that property. Not only he violated the terms of the agreement, such a sale would be contrary to law as the property was under court attachment. Therefore, sale of the property by Mr.Khetrapal and his wife to Mr.Rahul Mullick and further by Mr.Rahul Mullick to the respondent No.2 would be of no consequence.
12.For these very reasons and particularly when Mr.Khetrapal had agreed that he would be personally liable to satisfy the decree, it is not even necessary to dwell into this issue whether in the facts of this case the corporate veil could be lifted. Still, we may hasten to add that it is not in dispute that the judgment debtor is a private limited company of which Mr.Aushim Khetrapal is the Managing Director. It appears to be a closely held company and it would even be possible to state that it is in the nature of "quasi partnership", more particularly when we observe the manner in which Mr.Khetrapal acted and did not react to the attachment of the property. However, in the absence of exact shareholding or the extent of shareholding of Mr.Khetrapal or other members of his family, if any, we refrain from making any authoritative comments on this aspect.
EFA (OS) No.17/2008 Page 9 of 10
13.We are, thus, of the view that even if the respondent No.2 is a bona fide purchaser (though even this is disputed by the learned senior counsel for the appellant as the appellant's contention is that to avoid payment of decretal amount, the aforesaid transactions are entered into, which are allegedly sham), it is Mr.Aushim Khetrapal who suppressed the aforesaid facts and sold the property to Mr.Rahul Mullick, who in turn sold it to the respondent No.2. Therefore, the respondent No.2 or his predecessor-in-interest (Mr. Rahul Mullick) are duped by Mr.Aushim Khetrapal, which cannot affect the interest of the decree holder adversely.
14.We are, thus, of the view that for satisfaction of the decree in favour of the appellant, property in question can be put to auction. Accordingly, we allow this appeal, aside the order dated 12.3.2008 and dismiss the objections of the respondent No.2.
15.Since the earlier auction purchaser has already withdrawn the amount deposited by this Court, the trial court shall issue fresh proclamation of sale of the property in question and proceed further from that stage. Matter shall be listed before the learned Single Judge for this purpose on 8.12.2008.
(A.K. SIKRI)
JUDGE
November 07, 2008 (MANMOHAN SINGH)
hp. JUDGE
EFA (OS) No.17/2008 Page 10 of 10