TMI Blog2012 (8) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed. For their contumacious conduct of suppressing facts from the Calcutta High Court and thereby prolonging the litigation, the appellants and Bhagwati Developers are saddled with cost of ₹ 5 lakhs each. The amount of cost shall be deposited by them with the Supreme Court Legal Services Committee within a period of three months. - CIVIL APPEAL NO. 5918 OF 2012 (Arising out of SLP (C) No. 11501 of 2009), With CIVIL APPEAL NO.5917 OF 2012 (Arising out of SLP (C) No. 17156 of 2009) - - - Dated:- 21-8-2012 - SINGHVI, G.S. AND MUKHOPADHAYA,SUDHANSU JYOTI, JJ. J U D G M E N T G. S. Singhvi, J. 1. Leave granted. 2. Whether M/s. Vidur Impex and Traders Pvt. Ltd., and five other companies (hereinafter described as the appellants), who are said to have purchased the suit property, i.e. 21, Aurangzeb Road, New Delhi in violation of the order of injunction passed by the learned Single Judge of the Delhi High Court are entitled to be impleaded as parties to Suit No.425/1993 filed by respondent No.1 M/s. Tosh Apartments Pvt. Ltd. is one of the two questions which arises for consideration in these appeals filed against judgment dated 20.2.2009 of the Division Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handed over the same to respondent No.4. On coming to know about the proposed alienation of property by respondent No.2, respondent No.1 filed Suit No.425/1993 in the Delhi High Court for specific performance of agreement for sale dated 13.9.1988, award of damages and injunction. It also filed IA No.1947/1993 under Order 39 Rules 1 and 2 CPC. The learned Single Judge passed order dated 18.2.1993 and directed that defendant Nos. 1 and 3 (respondent Nos. 2 and 4 herein) shall not transfer, alienate or part with possession in any manner or create third party rights in respect of the suit property. After receiving summons, respondent Nos.2 and 4 filed IA No. 10730/1993 under Order 7 Rule 11 for rejection of the plaint on the ground that the same was barred by time. The learned Single Judge dismissed the application vide order dated 5.4.1994 and directed that interim order dated 18.2.1993 shall continue. 6. On 19.2.1997, respondent No.2 executed 6 agreements for sale in favour of the appellants for a total consideration of ₹ 2.88 crores. In furtherance of those agreements, six sale deeds were executed and registered on 30.5.1997. In the meanwhile, the appellants executed agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d IA No.1537/2001 for restoration of the suit by asserting that IA No.255/2001 had been filed by an advocate who was not authorised to do so. The learned Single Judge directed that the application be listed only after filing of an affidavit by respondent No.2 that he had not authorised Shri Bhupinder Singh, Advocate to file I.A. No.255/2001. Respondent No.2 did not file the required affidavit till his death and as a result, I.A. No.1537/2001 is said to be still pending. 9. Another front of litigation was opened by Bhagwati Developers with the allegation that the appellants have failed to execute the sale deed in terms of agreement dated 18.3.1997. The dispute between Bhagwati Developers and the appellants was referred to the sole arbitration of Dr. Debasis Kundu, an Advocate of the Calcutta High Court. The Arbitrator passed award dated 7.1.1999 and directed the appellants to hand over vacant possession of the suit property along with the building to Bhagwati Developers on or before 31.1.1999 and also execute the sale deed after securing requisite permission and no objection certificate from the competent authorities. Simultaneously, Bhagwati Developers was directed to pay the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointed by the Calcutta High Court and Delhi Police from interfering with the possession of respondent No.4. Some of the observations made in that order, which have bearing on the disposal of these appeals, are extracted below: Quite clearly Respondents No.4 to 9 in this application were aware of the fact that Defendant No.1 had filed Suit No.161/99. A mention was made in the plaint in Suit No. 161/99 that the present suit, that is, Suit No.425/93 was pending in this Court. So, Respondents No.4 to in this application were also aware of the pendency of this suit. It appears that Respondents No.4 to 9 in this application did not bother to find out the correct factual position with regard to the possession of the suit property or with regard to the interim orders passed by this Court. Well before all this, and apparently expecting Defendant No.1 to perform the Agreement to sell, these 6 persons who are Respondents No.4 to 9 in this application entered into an agreement to sell the suit property to Respondent No.10 in this application. There appear to have been some disputes between Respondents No.4 to 9 in this application and Respondent No.10 in the application in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and misrepresentation of facts by Respondents No.4 to 9 in this application insofar as Respondent No.10 in this application is concerned. Respondents No.4 to 10 are at fault in not finding out what the correct facts are and making necessary enquiries in this regard. They appear to have deliberately misled the learned Arbitrator and the Calcutta High Court. (emphasis supplied) 13. Respondent No.4 filed another application (IA No. 9576/2001) for restraining the appellants from executing the sale deed in favour of Bhagwati Developers. The learned Single Judge entertained the application and passed interim order in terms of the prayer made. The same respondent filed an application in EC No.10/2000 pending before the Calcutta High Court and brought to the notice of that High Court, order dated 8.2.2001 passed by the Delhi High Court in Suit No. 425/1993. After taking cognizance of the rival submissions, the learned Judge of the Calcutta High Court passed order dated 15.2.2001 and made it clear that the order passed by that Court will be subject to the order which may be passed by the Delhi High Court. The relevant portions of that order are reproduced below: The facts remain t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding unless such question be raised in a proceeding under Order XXI Rule 97 C.P.C. From the records of this Court, it does not appear that any such application under Order XXI Rule 97 has ever been made in order to enable the parties to resisting possession in execution of the decree, so that they would have an opportunity to place their cases about the executability of the decree against them. (emphasis supplied) 14. Thereafter, Bhagwati Developers filed IA No. 2268/2003 in Suit No.425/1993 pending before the Delhi High Court with the prayer that the receiver appointed by the Calcutta High Court be continued. Respondent No.1, who had already filed IA No.8147/1998 for appointment of receiver, contested the application of Bhagwati Developers by asserting that it had no locus standi in the matter because the agreement by which it purchased the property from the appellants was fraudulent in nature. Respondent No.1 also reiterated its prayer for appointment of a receiver by the Delhi High Court by contending that respondent No.4 was a ranked trespasser and there was every possibility of his entering into clandestine deals and alienating the property. On his part, respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 of the Code of Civil Procedure. It is also evident on record that defendant No. 3 who is currently in possession does not enjoy the status either of licensee or of lessee nor he is there any other capacity with the consent of either of the parties. He is simply holding over the possession once open a time he was given the task of getting of Sudan Embassy vacated. This Court really wonder about the sanctity of such kind of agreements as executed between the plaintiff and defendant No.3 and between defendant No.l and defendant No. 3 for the purpose of getting the Sudan Embassy vacated. Rent Control laws seem to have been thrown to the winds. Task is taken by individual to get the premises vacated from Sudan Embassy and that too for consideration. I am afraid if such an agreement has a legal sanctity. That being so the possession of defendant No.3 cannot be termed as legal in the suit property. If at all his services charges were not paid he has the legal remedy either with the plaintiff or defendant No.l. Under no law he can be permitted to retain the possession of the property. Therefore in any case he has to go out of the property he being stranger to the suit property having no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29. In view of the fact that this court while allowing the application of the plaintiff has appointed Receiver for managing the control and supervision of the property in question. Therefore, the order passed by the Calcutta High Court appointing Receiver has to be kept in abeyance as Calcutta High Court itself stated that decision of Delhi High Court shall have precedence over their decision. This being so, plea of the proposed defendant No. 10 that Receiver so appointed by Calcutta High Court should continue, cannot be accepted. 17. The learned Single Judge then considered the application filed by respondent No.4 for amendment of the written statement and dismissed the same by recording the following observations: True, law of amendment is quite liberal and Courts ordinarily permits amendment provided such amendments are not mischievous in nature with a view to delay the legal proceedings and setting up entirely new case than the one pleaded earlier but in this case, I may say that written statement was filed way back in 1993 and good number of years have passed, but it never struck the defendant to make such amendment simply by putting the blame on earlier lawyer. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have the locus to contest the suit. Respondent No.1 also raised an objection of delay by asserting that the appellants had sought impleadment after 11 years of having entered into a clandestine transaction with respondent No.2. Respondent No. 1 relied upon orders dated 22.1.2001, 24.1.2001 and 8.2.2001 passed by the Delhi High Court and Suit No. 161/1999 field by respondent No.2 for grant of a declaration that the sale deeds allegedly executed in favour of the appellants were forged and fabricated, to show that the appellants were very much aware of Suit No.425/1993 and pleaded that their assertion about lack of knowledge was false because they had been contesting Suit No.161/1999 for almost 7 years. Another plea taken by respondent No.1 was that the transactions entered into between respondent No.2, the appellants and Bhagwati Developers were ex facie illegal and on the basis of such transactions the appellants did not acquire any right or interest in the suit property. 19. The learned Single Judge dismissed IA No. 1861/2008 vide order dated 26.5.2008, relevant extracts of which are reproduced below: The cumulative sequence of events noticed above leads this Court to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developments and circumstances in this behalf need mention and/or reiteration: a) The suit filed by the plaintiff is predicated on agreement to sell dated 13.9.1988 purportedly executed in its favour by the defendant No.l, owner of the suit property, which is earliest transaction in point of time. b) Suit, on this basis, filed in April 1993 is also earliest legal proceeding instituted by the plaintiff. In this suit, ad interim injunction dated 18.2.1993 was passed restraining defendant Nos.1 3 from transferring, alienating or parting with possession of the suit property in any manner or creating third party rights therein. c) The plaintiff also filed another IA No.9154/1993 seeking restraint against the defendant No.l as well as defendant No.3 from changing the nature of the suit property by making structural changes, additions or alterations therein. In this application orders were passed directing them not to carry out any structural additions, alterations and permitted only the renovations like painting, polishing of the suit property. d) In spite of the restraint order dated 18.2.1993, the defendant No.l allegedly transferred the suit property by executing purpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld naturally be thrashed out in appropriate proceedings, suffice it to state was that all this was happening in violation of the injunction order passed in the instant suit. Attempt was made to get the Receiver appointed from the Calcutta High Court and take possession of the suit property. 33. In this behalf, we agree with the submission of Mr. Singhvi, learned senior counsel for the plaintiff, that in a suit for specific performance, the court has ample power and jurisdiction to appoint a receiver, in Kerr on Receivers 16th Edition (on page 58), it has been laid down that if a fair prima facie case for the specific performance of a contract is made to appear, the court may interfere upon motion and appoint receiver. In Foot Note No. 37, reference has been made to case law including C. Kennedy v. Lee (1870) 3 MER 441, M. cloudy. Phelp (1838) 2 JUR 962. The appointment may be made in such circumstances before the order for a sale is made absolute. (Re: Stephard, (1892) 31 IR 95). 21. The Division Bench approved the rejection of the appellants prayer for impleadment as parties in Suit No. 425/1993 by observing that after executing the agreement for sale in favour of Bhagwati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Bhagawati Developers invoked the doctrine of comity of jurisdiction of the Courts and argued that in view of the order passed by the Calcutta High Court for appointment of receiver who had already taken possession of the suit property, the Delhi High Court should have refrained from exercising its power to appoint receiver with a direction to him to take over the property. 24. Learned senior counsel for respondent No. 1 relied on Surjit Singh v. Harbans Singh (supra) and argued that the appellants are neither necessary nor proper parties because the agreements for sale and the sale deeds executed by respondent No.2 in their favour had no legal sanctity. Learned senior counsel submitted that the alienation of suit property by respondent No.2 in violation of the injunction granted by the Delhi High Court was nullity and such a transaction did not create any right in favour of the appellants or Bhagwati Developers so as to entitle them to contest the litigation pending between respondent Nos.1 and 2. Learned senior counsel submitted that in a suit for specific performance, any transfer which takes place in violation of an injunction granted by the Court would be hit by the doct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out, and that the name, of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the Court may be necessary in order to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the suit, be added. 26. In Ramesh Hirachand Kundanmal v. Municipal Corporation of Greater Bombay (1992) 2 SCC 524, this Court interpreted the aforesaid provision and held: Sub-rule (2) of Rule 10 gives a wide discretion to the Court to meet every case of defect of parties and is not affected by the inaction of the plaintiff to bring the necessary parties on record. The question of impleadment of a party has to be decided on the touchstone of Order 1 Rule 10 which provides that only a necessary or a proper party may be added. A necessary party is one without whom no order can be made effectively. A proper party is one in whose absence an effective order can be made but whose presence is necessary for a complete and final decision on the question involved in the proceeding. The addition of parties is generally not a question of initial jurisdiction of the Court but of a judicial discretion which has to be ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d settle all the questions involved in the suit, be added. The said provision makes it clear that a court may, at any stage of the proceedings (including suits for specific performance), either upon or even without any application, and on such terms as may appear to it to be just, direct that any of the following persons may be added as a party: (a) any person who ought to have been joined as plaintiff or defendant, but not added; or (b) any person whose presence before the court may be necessary in order to enable the court to effectively and completely adjudicate upon and settle the questions involved in the suit. In short, the court is given the discretion to add as a party, any person who is found to be a necessary party or proper party. A necessary party is a person who ought to have been joined as a party and in whose absence no effective decree could be passed at all by the court. If a necessary party is not impleaded, the suit itself is liable to be dismissed. A proper party is a party who, though not a necessary party, is a person whose presence would enable the court to completely, effectively and adequately adjudicate upon all matters in dispute in the suit, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the necessary parties in a suit for specific performance of a contract for sale are the parties to the contract or if they are dead, their legal representatives as also a person who had purchased the contracted property from the vendor. In equity as well as in law, the contract constitutes rights and also regulates the liabilities of the parties. A purchaser is a necessary party as he would be affected if he had purchased with or without notice of the contract, but a person who claims adversely to the claim of a vendor is, however, not a necessary party. From the above, it is now clear that two tests are to be satisfied for determining the question who is a necessary party. Tests are - (1) there must be a right to some relief against such party in respect of the controversies involved in the proceedings; (2) no effective decree can be passed in the absence of such party. As noted hereinearlier, two tests are required to be satisfied to determine the question who is a necessary party, let us now consider who is a proper party in a suit for specific performance of a contract for sale. For deciding the question who is a proper party in a suit for specific performance the guidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might appear that the contract either ought not to be, or could not be performed. (emphasis supplied) 30. In Amit Kumar Shaw v. Farida Khatoon (supra), this Court examined the correctness of the order passed by the Calcutta High Court which had approved the dismissal of the application filed by the appellants for impleadment as parties to the suit filed by the original owner Khetra Mohan Das and the transferees, namely, Birendra Nath Dey and Smt. Kalyani Dey. One Fakir Mohammad claimed right, title and interest in the suit property by adverse possession. The suit was decreed by the trial Court. On appeal, the same was remanded for fresh adjudication of the claim of the parties. Fakir Mohammad challenged the order of remand by filing two second appeals. During the pendency of the appeals, Birendra Nath Dey assigned leasehold interest in respect of a portion of the suit property to the appellants. Smt. Kalyani Dey sold the other portion of the suit property to the appellants. When the appellants applied for recording their names in the municipal records, they came to know about the pendency of the appeals. Immediately thereafter, they filed an application for impleadment which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a), this Court upheld the order passed by the trial Court for impleadment of respondent Nos.3 to 5, who had purchased the suit property without knowledge of the pending litigation, as parties. On behalf of the appellant, it was argued that respondent Nos. 3 to 5 cannot be treated as necessary parties because alienation made in their favour was in violation of the injunction order passed by the Court. In support of this argument, reliance was placed on the judgment in Surjit Singh v. Harbans Singh (supra). This Court distinguished that judgment by observing that in that case the assignors and the assignees had knowledge of the injunction order passed by the Court and held that the order passed by the trial Court which was affirmed by the District Judge and the High Court does not call for interference. 32. In Vinod Seth v. Devinder Bajaj (supra), this Court interpreted Section 52 of the Transfer of Property Act, 1882 and observed: It is well settled that the doctrine of lis pendens does not annul the conveyance by a party to the suit, but only renders it subservient to the rights of the other parties to the litigation. Section 52 will not therefore render a transaction relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Once that is so, Pritam Singh and his assignees, respondents herein, cannot claim to be impleaded as parties on the basis of assignment. Therefore, the assignees-respondents could not have been impleaded by the trial court as parties to the suit, in disobedience of its orders. 34. In Sarvinder Singh v. Dalip Singh (1996) 5 SCC 539, this Court considered the question whether the respondent who purchased the property during the pendency of a suit for declaration filed by the appellant on the basis of the registered Will executed by his mother is entitled to be impleaded as party and observed: The respondents indisputably cannot challenge the legality or the validity of the Will executed and registered by Hira Devi on 26-5- 1952. Though it may be open to the legal heirs of Rajender Kaur, who was a party to the earlier suit, to resist the claim on any legally available or tenable grounds, those grounds are not available to the respondents. Under those circumstances, the respondents cannot, by any stretch of imagination, be said to be either necessary or proper parties to the suit. A necessary party is one whose presence is absolutely necessary and without whose presence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Dhurandhar Prasad Singh v. Jai Prakash University (2001) 6 SCC 534 and observed that there is no absolute rule that the transferee pendente lite shall be allowed to join as party in all cases without leave of the Court and contest the pending suit. 36. Though there is apparent conflict in the observations made in some of the aforementioned judgments, the broad principles which should govern disposal of an application for impleadment are: 1. The Court can, at any stage of the proceedings, either on an application made by the parties or otherwise, direct impleadment of any person as party, who ought to have been joined as plaintiff or defendant or whose presence before the Court is necessary for effective and complete adjudication of the issues involved in the suit. 2. A necessary party is the person who ought to be joined as party to the suit and in whose absence an effective decree cannot be passed by the Court. 3. A proper party is a person whose presence would enable the Court to completely, effectively and properly adjudicate upon all matters and issues, though he may not be a person in favour of or against whom a decree is to be made. 4. If a person is not fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 18.3.1997 in favour of Bhagwati Developers, the appellants cannot claim to have any subsisting legal or commercial interest in the suit property and they cannot take benefit of the order passed by the Calcutta High Court for appointment of an arbitrator which was followed by an order for appointment of receiver because the parties to the proceedings instituted before that Court deliberately suppressed the facts relating to Suit No.425/1993 pending before the Delhi High Court and the orders of injunction passed in that suit. 38. We are in complete agreement with the Delhi High Court that the application for impleadment filed by the appellants was highly belated. Although, the appellants have pleaded that at the time of execution of the agreements for sale by respondent No.2 in their favour in February 1997, they did not know about the suit filed by respondent No.1, it is difficult, if not impossible, to accept their statement because the smallness of time gap between the agreements for sale and the sale deeds executed by respondent No.2 in favour of the appellants and the execution of agreement for sale by the appellants in favour of Bhagwati Developers would make any perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss an effective decree. 40. The next question which merits consideration is whether the Delhi High Court was justified in appointing the receiver and directing him to take possession of the property. Though, learned senior counsel appearing for Bhagwati Developers has sought to invoke the doctrine of comity of jurisdictions of the Courts for continuance of the receiver appointed by the Calcutta High Court, we do not find any merit in his submission. It is not in dispute that respondent No.1 had filed the suit for specific performance on 1.2.1993 and the learned Single Judge of the Delhi High Court passed the order of injunction on 18.2.1993. The arbitral award for specific performance of the agreement for sale of the same property entered into between the appellants and Bhagawati Developers was obtained on 7.1.1999. The execution proceedings were instituted in the Calcutta High Court in 2000 and the order for appointment of receiver was passed on 12.8.2000. It is thus clear that when Bhagwati Developers approached the Calcutta High Court, the Delhi High Court was already seized with the suit involving the subject matter of the award. The contention of the appellants and Bhagawat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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