TMI Blog2012 (7) TMI 1088X X X X Extracts X X X X X X X X Extracts X X X X ..... f Ferani that in the interregnum steps have been taken for the removal of encroachment and for carrying out the work of development. Third party rights have intervened. Even after the suit was instituted on 13 May 2008, an application for ad interim relief was moved before the Learned Single Judge only on 3 March 2010. The only explanation which the administrator had for the delay in moving an application for ad interim relief is that the Sub Registrar and the Municipal Corporation had been moved not to register documents or, as the case may be, to grant building permission and it was only in October / December 2009 that the Municipal Corporation informed him that absent any injunction, it would proceed with permissions. Admittedly, in the meantime, the work under the project was continuing. These are circumstances which must weigh with the Court in declining to grant a stay on construction at the ad interim stage. The order which the Learned Single Judge passed precludes the sale of any unit whatsoever without the consent of the parties. Parties are in dispute and an order of the Court restricting the sale of constructed premises only with the consent of the parties would vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eard at length, it would not be appropriate or proper to have a hearing confined only to the disposal of the application for ad interim relief. Two appeals have been filed in these proceedings. The first appeal is by Mr. Nusli Neville Wadia, the Plaintiff; while the second appeal is by Ferani Hotels Private Limited, the First Defendant. The suit has been instituted by the Plaintiff in his capacity as the administrator of the estate of Late E.F. Dinshaw. For convenience of reference and since there are two appeals, it would be appropriate to refer to the parties as the administrator and Ferani. Reference to the other Defendants would be made appropriately, as and when necessary. 2. The suit has been instituted, inter alia, to seek a declaration that an agreement entered into between the administrator and Ferani on 2 January 1995 stands vitiated by fraud and has been duly determined with effect from 12 May 2008. Consequential reliefs have also been claimed to the effect that the powers of attorney executed by the Plaintiff stand validly revoked and that certain agreements entered into between Ferani and the other Defendants, including among them agreements which date back to 2001, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding a corporate body under its control. The agreement envisaged that the administrator would continue to be in juridical possession of the land. The administrator was to transfer title and handover formal and juridical possession of the land to the purchasers of the building constructed by Ferani. Clause 15 of the agreement stipulated that Ferani would be dealing with outsiders/third parties on principal to principal basis and the relationship between the parties would not be in the nature of a partnership and/or an association of persons. Clause 16(a) of the agreement provided that neither party shall be entitled to terminate or resile from the agreement or their obligations thereunder, the intention of the parties being that the agreement would be operative till the time that the entire development project was complete and a sale / transfer as contemplated had taken place. Ferani was required to furnish to the administrator a statement of accounts at monthly intervals in order to establish that his 12% share was paid into a designated bank account simultaneously with the receipt by Ferani of its 88% share. An annual audit was to be carried out by C.C. Chokhsi Co. Chartered A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales . 7. On 9 June 2000, Ferani addressed a communication to the administrator accepting that the Fifth Defendant was a sister concern , but claimed that it had a separate entity and was a third party within the meaning of clause 8(a) of the agreement. According to Ferani the sale price which is reflected in the transaction (Rs.1,510/- per sq. ft.) was the rate at which the premises under sale were capable of realizing in the then market conditions. Nonetheless an offer was made by Ferani to the administrator that it would be willing to sell to the administrator or his nominees, within thirty days, 56 similar flats at the rate of ₹ 1,510/- per sq. ft. on the same terms and conditions of sale as applicable to the Fifth Defendant. During the course of the development of the lands, nearly 19 meetings took place between the parties. The record would indicate that the administrator had a serious grievance that Ferani had entered into transactions for the sale of constructed premises to third parties who were alleged to be companies forming part of the Raheja group. Whether there is prima facie merit in that allegation would be considered for the purposes of the present appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been heard at length following the filing of affidavits, the entirety of the Motion for interim relief would have to be disposed of. Accordingly the Learned Single Judge issued a direction to the effect that Ferani shall not put any party, either a genuine third party or any related party including the other Defendants to the suit, in possession of any constructed premises except with the approval of the Plaintiff, pending the suit. The Learned Single Judge, however, excluded from the operation of the order Kotak Mahindra Bank Limited in the building constructed for them by Ferani under certain agreements dated 15 December 2006. The Motion was disposed of. The Learned Single Judge had stayed the operation of the order for a period of two weeks. The order passed by the Learned Single Judge was stayed by a Division Bench of this Court on 26 July 2010. 11. Before we deal with the issues which arose before the Learned Trial Judge, prima facie, on the merits of the dispute it will be necessary for the Court to consider the ambit of the provisions of Section 9A of the Code of Civil Procedure, 1908. As we have noted, at the hearing of the application for ad interim relief, an obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (c ) Mukund Ltd. v. Mumbai International Airport (2011(2) MLJ 936 (DB); (d) Jagshi Shah v. Shaan Builders (2012) 3 Bom CR 770 (DB). (ii) Whether Section 9A is inconsistent with the provisions of Order 14 Rule 2 and will therefore stand repealed by Section 16 of the Code of Civil Procedure Amendment Act 2002 is concluded by the following decisions : (a) Satpuda Tapi Parisar Sahakari Sakhar Karkhana Ltd. v. Jagruti Industries (2008(5) Bom CR 284 (Aurangabad Bench); (b) Foreshore Co-operative Housing Society Limited v. Praveen Desai (2009(1) Bom CR 757 (DB). 14. The Court has been informed during the course of the submissions by learned Senior Counsel appearing on behalf of the administrator that the judgment of this Court in Foreshore Co-operative Housing Society was carried in appeal to the Supreme Court both on the point as to whether limitation can be raised as a jurisdictional issue under Section 9A and on whether Section 9A is inconsistent with Order 14 Rule 2. A Special Leave Petition has been admitted by the Supreme Court by an order dated 6 September 2011. The administrator has made a statement before this Court that on this issue, he wishes to canvas the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shah (2009(2) Bom.C.R. 622); (v) Mukund Limited v. Mumbai International Airport (2011(2) Mh.L.J. 936); (vi) Associated Bombay Cinemas Private Limited v. Jamni S. Ramchandani (2011 Vol. 113(2) Bom.L.R. 829). 16. The principles which emerge from these decisions can be formulated thus: (i) The provisions of Section 9A are mandatory. Where at the hearing of an application for granting or setting aside an order granting interim relief in a suit, an objection to the jurisdiction of the Court to entertain such a suit is taken by any of the parties, the Court shall proceed to determine at the hearing of the application the issue as to jurisdiction as a preliminary issue before granting or setting aside the order granting interim relief. Such an application cannot be adjourned to the hearing of the suit and must be disposed of expeditiously; (ii) Though the application for the grant of interim relief or, as the case may be, for setting aside an order granting interim relief cannot be disposed of before a decision on the preliminary issue as to jurisdiction, the Court may nonetheless grant such interim reliefs as it may consider necessary pending the determination by it of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the date of the institution of the suit and those in any event would be within limitation. Consequently, it was submitted that even if the objection that has been raised by Ferani were to be upheld upon adjudication, that would result in only a part of the claim being held to be barred by limitation. The administrator does not concede at this stage that any part of the claim is barred by limitation. But, even if the submissions of Ferani were to be upheld, that would not result in the rejection of the suit in its entirety. Section 9A, it was urged, would not apply to this situation. Secondly, it is urged that sub section (1) of Section 9A does not oust the authority of the Court to consider atleast at the threshold whether the objection as to jurisdiction has some substance or justification. In other words, it was urged that an objection as to jurisdiction does not mandate that the Court must in every instance frame a preliminary issue and if such a construction were to be placed, it would be susceptible to grave abuse. 18. We would take up the second part of the submission in the first instance. The object and purpose of the legislature in introducing Section 9A was to obvi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aising of a preliminary issue under Section 9A. The judgment of the Supreme Court in Bagasarwalla's case provides some element of guidance when the Supreme Court notes that the Trial Judge is not helpless merely because a preliminary issue is sought to be raised under Section 9A. We are of the view that in order to ensure that Section 9A is not susceptible to grave abuse at the behest of an unscrupulous Defendant, it would be within the jurisdiction and authority of the Trial Judge to consider as to whether the objection as to jurisdiction arises bonafide or whether it is wholly frivolous. Undoubtedly, this would contemplate only a minimal enquiry by the Court, since if at that stage a comprehensive adjudication were to be contemplated, that would virtually defeat the provisions of Section 9A. The provisions of Section 9A therefore would not be inconsistent with the Trial Judge exercising a minimal enquiry at the very threshold to satisfy the conscience of the Court that the objection of jurisdiction has been raised bonafide and is not a frivolous or irrelevant exercise meant only to delay or defeat the process of the Court. 19. On the first leg of the submission it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interlocutory relief though the claim on the basis of which the application is founded falls outside jurisdiction. This rationale would be relevant both to a situation where the entirety of the claim lies outside the jurisdiction of the Court as well as in a situation where a part of the cause of action is outside the jurisdiction, though the rest falls within. An objection as to the jurisdiction of the Court to entertain such a suit must bear its natural and ordinary connotation which would mean an objection to the jurisdiction of a Court to entertain even a part of the cause of action raised in a suit. For this Court to hold that Section 9A would not apply in a situation where the objection of jurisdiction would not result in the disposal of the entire suit, even if it were to be upheld would be to introduce a condition which has not been imposed by the legislature. In the course of interpreting Section 9A, it would not be open to this Court either to rewrite the provision or to introduce a condition which the legislature has not found it fit to impose. If as a result of the experience which has been gained over the years on the practical working of the statutory provision, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties, they were a third party within the meaning of the agreement. According to the First Defendant the sales made to Defendants 8 to 49 were third party sales and the claim was barred by limitation. As regards the negotiation letters which were sought to be revoked as part of the reliefs claimed in the suit, it has been submitted that those letters date between 30 March 2001 and 4 April 2005, besides which there were other agreements between April 2005 and March 2006. In our view, having due regard to the nature and basis of the objection, it cannot be asserted that the claim as to limitation is frivolous or that it was lacking in bonafides. 22. The Learned Single Judge was in these circumstances justified and as a matter of fact Section 9A(1) obligated the Court to raise an issue of jurisdiction to be tried as a preliminary issue. Having decided to raise the issue of limitation as a preliminary issue, the Learned Single Judge was of the view that no case for the grant of ad interim relief was made out. The basis of this determination is contained in paragraphs 71 and 72 of the impugned order. The Learned Single Judge has noted that the administrator had atleast suspected some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub section (2) of Section 9A. The hearing of the Motion for interim relief would have to be taken up after the determination of the preliminary issue under Section 9A. 23. That leads the Court to the issue as to whether the grant of any ad interim relief is warranted. As we have noted earlier, the final relief that the Learned Single Judge has granted is not an ad interim order within the meaning of Section 9A(2), but a final order on the Notice of Motion. The Learned Single Judge was of the view that no case for the grant of ad interim relief was made out. That is the matter which now falls for the determination of the Court. 24. The substratum of the case of the Plaintiff is on the allegation of fraud. The allegation of fraud can for the purposes of elucidation be broadly distributed into four heads as pleaded in the plaint:- (i) Defendants 1 to 4 have transacted with themselves through the device of front / nominee companies. This allegation of fraud involves Defendants 8 to 13, 16-17, 19-30 and 32-49. According to the Plaintiff for each of the financial years in which minimum guaranteed amounts were to be paid, a cluster of companies was incorporated at the behest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial deposit and licence fee from the licensee. The leave and licence agreement was disclosed to the administrator only under a letter dated 5 April 2005 and 12% of the deposit amount or of the licence fee was not shared with him at all. Thereafter, according to the administrator, the areas with the licensee were transacted with Defendant No.31 which is an associated concern of the Raheja group and the deposit was transferred to it. The administrator objected to this transaction on 2 June 2005; (iv) The fourth allegation is that a transaction was entered into on 15 December 2007 by Ferani with the Kotak group, involving two separate agreements, one of which was disclosed and the other was concealed. According to the Plaintiff, the actual purchase consideration was split into two agreements, one for the building and the second for amenities such as aluminum cladding. Both the agreements were entered into on the same day and the consideration was split up approximately in the ratio of 85 : 15. The administrator was paid his share only under the first agreement. On obtaining knowledge of the transaction, the administrator wrote to Kotak on 24 February 2008. It was only after the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent third party investors, and that no member of the Raheja family is a director or shareholder in any of the buyer companies in these transactions. Further, in 8 or 9 transactions, the third party concerned, involved a relative of the spouse of a daughter of the Raheja family in the capacity as director / shareholder / investor, none of which could be said to be a party related to Ferani. 26. Clause 8(a) of the agreement provides that the development project contemplated by the agreement would involve the sale or transfer by any other format by Ferani to third parties either on an outright sale basis or ownership basis or otherwise, of the buildings which were to be constructed by Ferani. When the parties referred to third parties in clause 8(a), there was a business understanding which was reflected in the words of the document. The duty of the Court while interpreting a commercial document must be to give a business meaning to the words used. When parties referred to transfers to third parties, evidently they had an intent that the transactions would be arms length transactions. Evidently, the consideration that was payable to the administrator representing 12% of the gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as a genuine sale and you cannot treat it as on account payment to be finally adjusted against the genuine sale effected by Palm Grove Beach Hotels Pvt. Ltd. Hence this is genuine sale and the payment of 12% of the sale contribution by them to you must be taken as fulfillment of our obligation. 28. Ferani therefore clearly sought to justify the sale to the Sixth Defendant as a genuine sale. Evidently therefore it was within the contemplation of parties that a sale in favour of a third party within the meaning of clause 8(a) must be a genuine sale. Moreover, the auditors, C.C.Chokshi Co. certified on nearly 11 occasions, that they were informed by Defendants 1 to 4 that none of the sales or transactions involved related or associated companies. If the submission which has now been sought to be urged reflected the understanding of Ferani at the relevant time, they would have only informed the auditors that the issue as to whether the sales were to a related or associated company was irrelevant because in their construction, a third party would mean an entity which was not a party to the contract. Evidently that was not the understanding of either of the parties at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first time, absent such a submission being urged before the Learned Single Judge and particularly in the absence of either pleadings or underlying material to document the submission. This is evidently a matter which must be deferred to a closer consideration, when the hearing of the application for interim relief in the Notice of Motion can be taken up. 30. In pursuance of the agreement that was entered into between the parties on 2 January 1995, development has proceeded. During the course of the hearing, it has emerged before the Court that there have been nearly 1600 transactions comprising both of residential and commercial properties of which 144 are commercial transactions. The administrator has challenged 44 of the commercial transactions. The Court has been informed that there is no dispute in regard to the rates at which the transactions relating to the residential properties have taken place. On behalf of Ferani, it has been submitted that out of the 44 transactions pertaining to commercial properties that have been challenged by the administrator, 41 involved registered sale deeds, where possession has already been handed over to third parties. 34 out of the 44 tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inistrator objected to the transactions. On 2 November 2005 the administrator in a communication suggested that after a notice of seven days, he shall be free to revoke the power of attorney provided to Ferani on account of its abuse. A meeting took place on 16 November 2005 between the representatives of the parties where it was agreed that a chart furnishing identities of the purchasers of the units / buildings and a break up of the transactions by category would be furnished. According to the administrator, the chart was furnished on 17 November 2005. 32. We have adverted to some of these events because they would suggest prima facie, though in fairly unmistakable terms, that parties were in dispute over the transactions which Ferani entered into right since April 2000. The record before the Court would, prima facie, indicate that from time to time the administrator raised objections to those transactions and was confronted with the defence by Ferani that the transactions accorded with the prevailing market price and were genuine transactions. In this background, the fact that the administrator chose to file the suit only in May 2008 assumes significance. Equities have interv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited or, as the case may be, paid directly. We are of the view that the ends of justice would be met if, pending the hearing and final disposal of the preliminary issue under Section 9A, Ferani is directed to maintain accounts of all transactions falling within the purview of the agreement dated 2 January 1995 and in addition, is directed to continue to deposit an amount representing 12% of the share of the administrator out of the gross total consideration without prejudice to the rights and contentions of the parties. 35. Accordingly, the Appeals shall stand disposed of in terms of the following directions : (i) Appeal 817 of 2010 filed by Ferani Hotels Private Limited shall stand allowed and the impugned order of the Learned Single Judge dated 19 July 2010 shall stand set aside; (ii) The following issue is raised under Section 9A of the Code of Civil Procedure, 1908 and shall be tried as a preliminary issue : Whether the claim of the Plaintiff in the suit is barred by limitation.' (iii) The Plaintiff shall file an affidavit in lieu of the examination-in-chief within a period of four weeks from today. Shri Justice D.G. Karnik, Former Judge of this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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