TMI Blog2008 (12) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... aware about these transactions and that a fraud was committed not only on the applicant Bank but also on the Court. From the facts and on the basis of documents produced on record in support of all these transactions, it clearly appears to the Court that the respondent Nos. 4 to 13 came to be in possession of the properties in question. Thus there is no matter of doubt or suspicion that the respondent Nos. 4 to 13 are the lawful owners and are in legal possession of the properties in question and they cannot be deprived of such lawful rights and legal possession vested in them years back, by entertaining these applications after a considerable length of time and by permitting the applicants to raise the plea of fraud. The Court, therefore, rejects both these applications - CO. APPLICATION NOS. 280 AND 312 OF 2004 - - - Dated:- 5-12-2008 - K.A. PUJ, J. R.M. Desai for the Applicant. Ms. Amee Yajnik, D.S. Vasavada and Nitin K. Mehta for the Respondent. JUDGMENT 1. The applicant, State Bank of India, has taken out this Judge s Summons making following prayers; (A)The Liquidator of New Gujarat Synthetics Ltd. (In Liqu.), be directed to take possession o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive report on the record of this case. During the pendency of this application, several affidavits and counter-affidavits were file and along with which voluminous documents were filed by the parties. The Court has called for the records and proceedings of H.R.P. Suit No. 243 of 1994 and Execution Petition No. 172 of 1994. The Court has further called for the records and proceedings of H.R.P. Suit No. 152 of 1991. 3. The brief facts giving rise to the present application are that, New Gujarat Synthetics Ltd., (hereinafter referred to as NGSL for short) was a company incorporated and registered under Companies Act, 1956. By Indenture made on 29-4-1972 and registered with the Sub-Registrar of Assurances under Serial No. 5701 on 29-4-1972, one Company, namely, New Asarava Manufacturing Co. Ltd., transferred its leasehold interest for Rs. 7 lakhs being full purchase price of leasehold land, situated, lying and being at Mouje Dariapur Kazipur, City Taluka bearing Survey No. 34 Hissa No. A/1, Survey No. 20/1 bearing Survey No. 33 and Plot No. 423 of Survey No. 29 and Survey No. 419 together with the factory building and other structures on the said land for absolute use for the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereon. 6. The NGSL was sanctioned additional financial assistance and to secure the said additional financial assistance to the extent of Rs. 2,75,00,000 it was declared by the Company on 18-6-1985 that the title deeds listed in first schedule to the Memorandum of extension of equitable mortgage were deposited by constructive delivery as security. Particulars of charge by creation of mortgage were filed with the Registrar of Companies, Gujarat and the charge by way of mortgage in respect of the land bearing Survey No. 416 was registered with the Registrar of Companies, Gujarat. 7. It appears from the record that several winding up petitions were filed against NGSL for an order of winding up and in one of the petitions being Company Petition No. 10 of 1986, this Court vide its order dated 1-9-1989, pursuant to the recommendations of the Board for Industrial Financial Reconstruction, directed that NGSL be wound up by and under supervision of this Court and the Official Liquidator attached to this Court was appointed as the Liquidator of the Company and he took the possession of the assets of the Company in liquidation. It, however, appears that the Official Liquidator had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company in liquidation had process house on the said land and the said process house was closed and later on it was transferred on the name of Aboo Investors and Dealers Ltd. (hereinafter referred to as ADIL for short). 9. In view of these facts gathered by the applicant-Bank, Officers of the applicant-Bank visited the site at Final Plot No. 31 of Town Planning Scheme No. 5 and they were surprised to note that a big dome was constructed and adjacent to the dome a workshop for automobile repair-ing was constructed. The dome was housing a automobile showroom purported to be owned by Kataria Group. On further inquiry with the personnel in the showroom it was informed that Kataria Group had purchased the property in different names i.e., in the name of respondent Nos. 5 to 13. 10. On behalf of the applicant-Bank it was submitted before the Court by Mr. Roshan Desai, learned advocate, that as decided in the case of Gujarat State Financial Corpn. v. Official Liquidator, Himalaya Tools (India) (P.) Ltd. [1996] 87 Comp. Cas. 658 (Guj.) once the mortgage is created, mortgagee becomes owner of the property and when it sells mortgaged properties, it is selling its own property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the said land belongs to the Company nor anybody else whether the applicant-Bank or other secured creditors or Textile Labour Association, or Ex-Directors of the Company specifically brought this fact to his notice. It is further stated that it has not been mentioned in the Statement of Affairs of the Company filed by the Ex-Directors of the Company. The balance-sheet of the Company also does not disclose this fact. It is further stated that he does not have any independent information, material or documents with him corroborating or contradicting the averments made by the applicant-Bank in its application. 12. On notice being served on respondent No. 4, Nanavati Associates filed their appearance and affidavit-in-reply is filed by Shri Pravinchandra Atmaram Shah, one of the Directors of the respondent No. 4 Company. The respondent No. 4 has raised several preliminary objections with regard to the maintainability of the application filed by the applicant-Bank. Mr. K.S. Nanavati, learned Senior Counsel appearing for respondent No. 4, submitted that the application suffers from the vice of suggestions falsi and suppresio veri in as much as the applicant has suppressed c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lessee and a textile unit was being run by it on the said land which was popularly known as Unit-II of NGSL. Thereafter, by registered agreement dated 28-5-1984, the said NGSL transferred its leasehold rights in the said land to M/s. Aboo Investors and Dealers Ltd. A supplementary agreement was entered into by and between NGSL and AIDL. 14. He has further submitted that the transfer of leasehold right by NGSL to AIDL was pursuant to the "Corporate Re-organization" of NGSL, which was approved by State Bank of India. Thus, with effect from 1984, NGSL had no right, interest, much less any leasehold right/interest on the said land in question and the leasehold rights and interest in the said land were transferred to AIDL. This fact is also evident from the letter dated 24-9-1986 issued by the State Bank of India to NGSL and a letter dated 6-10-1986/5-11-1986 written by NGSL to State Bank of India. It is, therefore, contended that the State Bank of India has knowledge about such transfer of leasehold right by NGSL in favour of AIDL right from the beginning i.e., 1984. Despite this fact, the State Bank of India had suppressed this fact in its present application and hence on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on AIDL to hand over the vacant and peaceful possession of the said land, by notice dated 10-11-1993. Since AIDL was not handing over back the vacant and peaceful possession of the land-in- question, respondent No. 4 was constrained to file a suit in Ahmedabad Small Causes Court, being H.R.P. Suit No. 243 of 1994. Pending the said suit before the Ahmedabad Small Causes Court, settlement was arrived at between the respondent No. 4 and AIDL and a joint purchi for a decree was filed before the Ahmedabad Small Causes Court on 20-5-1994. Ultimately a decree in terms of joint purchi was passed by the Ahmedabad Small Causes Court and AIDL was required to hand over a vacant and peaceful possession of the land-in-question to the respondent No. 4. However, despite the decree, AIDL did not hand over vacant and peaceful possession of the land to the respondent No. 4 and, therefore, an Execution Petition No. 192 of 1994 came to be filed by respondent No. 4 in the Ahmedabad Small Causes Court. Ultimately, pursuant to the execution proceedings, the vacant and peaceful possession of the land was handed over by AIDL to respondent No. 4. After the vacant and peaceful possession of the land-in-questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 7 has also filed an affidavit stating therein that the respondent No. 7 has purchased the land admeasuring 8618.05 sq. yards on different dates from the respondent No. 4 for a valuable consideration at the prevailing market rates. Mr. Rohan Kataria, proprietor of M/s. Kataria Movers, respondent No. 10 has also filed an affidavit stating therein that the respondent No. 10 has purchased the land admeasuring 450 sq. yards by deed of conveyance dated 23-11-1995 from the respondent No. 4 for a valuable consideration at the prevailing market rates. Mr. Rajendra Kataria, director of M/s. Rajendra Roadlines Pvt. Ltd., has also filed an affidavit stating therein that the respondent No. 11 has purchased the land, admeasuring 450 sq. yards by deed of conveyance dated 23-11-1995 from the respondent No. 4 for a valuable consideration at the prevailing market rates. Mr. Rajendra Kataria, karta of Rajendrakumar Rohankumar Kataria, HUF, respondent No. 12, has also filed affidavit stating therein that the respondent No. 12 has purchased the land admeasuring 376.63 sq. yards from the respondent No. 4 by deed of conveyance dated 20-12-1995 from the respondent No. 4 for a valuable consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er contended that the period of limitation starts from the date of knowledge. It is, therefore, contended that the prayers made in the Judges Summons are required to be granted. 20. Since certain new issues were raised by the applicant-Bank in its affidavit-in-rejoinder, the respondent Nos. 5 to 13 filed their affidavit in sur-rejoinder on 27-7-2005. Mr. Mihir Thakore, learned Senior Counsel appearing for respondent Nos. 5 to 13, inter alia, contended that there is no valid mortgage in favour of applicant-Bank of the leasehold rights of NGSL in the said property and even if the applicant Bank is presumed to be mortgagee, even then none of the reliefs prayed for can be granted for the following reasons : ( i )The applicant-Bank s claim that respondent Nos. 5 to 13 are in unauthorised and illegal occupation is ex facie untenable since the respondent Nos. 5 to 13 have purchased the property by validity executed conveyances from person owning and in possession of the said property and the applicant-Bank is under no circumstances, a mortgagee with possession and consequently the applicant-Bank can neither seek declaration that the respondents are in unauthorized occupation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company in the land in dispute in favour of AIDL was absolutely illegal and void since the Company had already mortgaged its leasehold rights in favour of the applicant-Bank on 13-10-1981 and further on 19-1-1983. It is further stated in the report that if the land in dispute as a part of the process house were lawfully and legally transferred by NGSL to AIDL, it was the duty of NGSL under section 138 of the Companies Act to inform the Registrar of Companies that the charge of the applicant-Bank qua the land in dispute is satisfied since the charged assets were transferred to AIDL with the charge. It is further contended that as a part of this transaction, if valid, the land in dispute or the leasehold rights in respect of the land in dispute, came to be transferred to AIDL, the AIDL acquired the property along with the subsisting charge of the applicant-Bank and then it was the statutory duty of AIDL to intimate the Registrar of Companies under section 127 of the Companies Act to record that AIDL has acquired the property subject to the charge of the applicant-Bank. With regard to the sale of ownership rights by the original owners of the land to the respondent No. 4, it is cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied on the decision of Patna High Court in the case of Nandkishore Bajoria v. Gaya Sugar Mills Ltd. AIR 1953 Pat. 390, wherein it is held that an agreement between the company and director-debenture-holder, which agreement is later on ratified by a resolution of the company, whereby the shares held by the company in another company were to be sold, and the sale proceeds utilised for paying off the preference shareholders, and the appellants who were holders of a great number of preference shares, were to be trustees for purposes of carrying out the agreement, the agreement cannot be given effect to either by the directors or shareholders, either by alteration of the charter of the company or the Articles of Association, the purpose of the agreement being illegal. If the purpose is illegal then no trust is created by the memorandum of agree-ment or the resolution of the board of directors. 26. In support of Mr. Desai s submission that decree obtained by the respondent No. 4 is nullity as it is obtained by fraud. He relied on the decision of the Hon ble Supreme Court in the case of State of Andhra Pradesh v. T. Suryachandra Rao [2005] 6 SCC 149, wherein the land was surr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res judicata. 28. Mr. Desai relied on the decision of the Full Bench of Bombay High Court in the case of Ratanlal Chandiprasad Jalan v. Raniram Darkhan AIR 1986 Bom. 184, for the proposition that a statutory tenant governed by the Bombay Rent Act retains transferable interest in the premises only if he had such transferable interest as a contractual tenant. It cannot be said that no statutory tenant is entitled to transfer his interest. 29. Mr. Desai further relied on the decision of the Hon ble Supreme Court in the case of Bhaiya Punjalal Bhagwanddin v. Dave Bhagwatprasad Prabhuprasad AIR 1963 SC 120, for the proposition that where a tenant is in possession under a lease from the landlord, he is not to be evicted for a cause which would give rise to a suit for recovery of possession under section 12 if his tenancy has not been determined already. It follows that whenever a tenant acts in a way which would remove the bar on the landlord s right to evict him, it is necessary for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and the fraud unravels everything, right. But fraud must necessarily be pleaded and proved. In the entire history of litigation nothing was pleaded, much less proved. The Court cannot countenance the plea of fraud without any basis. 35. Mr. Thakore further relied on the decision of the Hon ble Supreme Court in State of Punjab v. Gurdev Singh [1991] 4 SCC 1 for the proposition that Article 113 of the Limitation Act prescribes a time limit of three years. According to the third column in Article 113, time commences to run when the right to sue accrues. The words "right to sue" ordinarily mean the right to seek relief by means of legal proceedings. Generally, the right to sue accrues only when the cause of action arises, that is, the right asserted in the suit is infringed or when there is a clear and unequivocal threat to infringe that right by the defendant against whom the suit is instituted. 36. Mr. Thakore submitted that on the expiry of the period of lease, the erstwhile tenant who continues in possession, in the absence of being a tenant holding over, has to be treated as a tenant at sufferance whose right of occupation arises not from the erstwhile contract which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Thakore further relied on the decision of Supreme Court in Tirumala Tirupati Devasthanams v. K.M. Krishnaiah [1998] 3 SCC 331 in support of his submission that the applicant Bank s application is hopelessly barred by period of limitation. In this case, Summary Suit for possession could not be filed within the limitation period of six months under section 6 of the Specific Relief Act, 1963 by the dispossessed person. Even after expiry period of six months under section 6 the dispossessed person can still file a suit for possession on the basis of prior possession i.e., suit based on possessory title. But in such a suit the defendant who dispossessed the plaintiff could defend himself by proving title and if he proved title, he could remain in possession. Since in the case before the Supreme Court title of the defendant was found to have not been extinguished and was subsisting in respect of the suit, property, the dispossessed plaintiff, who had applied for possession after expiry of six months period from the date of dispossession prescribed in section 6 would not be able to recover the possession and the defendant could remain and retain its possession. 39. Having he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was obtained from the Charity Commissioner on 6-3-1990. Even before the Charity Commissioner was approached for grant of such permission, the trust had passed a Resolution for sale of property to respondent No. 4 on 22-12-1989 and an advertisement was also published in the daily newspaper, namely, Gujarat Samachar inviting objections on 12-1-1990. Since no objection was received from any one including the Official Liquidator and the applicant Bank, deed of conveyance was executed by the trust on 25-5-1990. 41. Since the term of the lease expired in 1993, the respondent No. 4 issued a notice to AIDL on 10-11-1993 to hand over the possession of the property in question. Admittedly, the lease hold rights were mortgaged with the applicant Bank for an unexpired period and hence on expiry of the said period in 1993 the respondent No. 4 being the owner of the property had every right to ask for the possession of the property from the lessee i.e., AIDL. Since the possession was not given, the respondent No. 4 filed H.R.P. Suit No. 243 of 1994 before the Small Causes Court, Ahmedabad. In the said Suit, settlement was arrived at between the parties and joint purshis for a decree was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents in their respective affidavits and all the doubts were cleared. The Court has at length discussed the rival contentions of the parties in the preceding paragraphs in light of the judgments cited by them in support of their respective contentions. The Court has not found any substance or merits in any of the contentions raised on behalf of the applicants. 43. No proper explanation has come forward as to why the proceedings were not initiated in time, especially when the applicant Bank was aware about transaction relating to transfer of lease hold right by the Company-in-liquidation to AIDL. The main defence raised by the respondents about the delayed action has remained unanswered. The half hearted attempt is made by the applicant by raising a plea of fraud. However, that plea is also not substantiated, much less it is proved. The respondents have observed all legal formalities. All actions were taken in accordance with law after obtaining appropriate orders from the concerned authorities and/or Courts. The respondents have neither committed any breach of provisions contained under section 293(1)( a ) of the Companies Act, 1956 nor they have taken any action in violation o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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