IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO.454 OF 2002 IN SUIT NO.475 OF 2002 BANK OF MAHARASHTRA, a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) act, 1976, having its Head Office at Lok Mangal, 1501, Shivaji Nagar, Pune-5, and its Overseas branch at Mittal Court, Nariman Point, Mumbai - 400 021 on behalf of themselves and all other creditors of Bagwe Udyog Ltd. ...Plaintiffs Versus 1.BAGWE UDYOG LTD., a limited company incorporated under the Companies Act, 1956, having its Regd.Office at 311, Plot No.1, 1st Floor, Near Panvel S.T.Stand, Mumbai-Pune Road, Panvel, Dist.Raigad, Pin 410 206 and office at 15-D, M.I.D.C., Central Board, Near SEEPZ, Andheri (East), Mumbai - 400 093. 2.M/S.DEVIKA TRADING CO.PVT.LTD., a company incorporated under the Companies Act, 1956, having its office at 9/26-B, Kandke Building, R.K.Vaidya Road, Dadar, Mumbai 400 028. 3.SUB-REGISTRAR OF ASSURANCES, having his office at Old Custom House, Mumbai. ...Defendants ...... : 2 : Mr.Hiralal Thakkar, Sr.Counsel with Ms.Sharila D’Souza i/b M/s.Umesh Shetty & Co. for Applicants/Plaintiffs. Mr.P.Ganvani with Mr.A.B.Nagvekar i/b M/s.Soloman & Co. for Defendant No.1. Mr.D.D.Madon, Sr.Counsel with Mr.Aliabbas Delhiwala i/b M/s.Kanga & Co. for Defendant No.2. ...... CORAM : A.M.KHANWILKAR, J. CORAM : A.M.KHANWILKAR, J. CORAM : A.M.KHANWILKAR, J. DATE OF RESERVING ) DATE OF RESERVING ) DATE OF RESERVING ) THE ORDER ) : 11/04/2007. THE ORDER ) : 11/04/2007. THE ORDER ) : 11/04/2007. DATE OF PRONOUNCING) DATE OF PRONOUNCING) DATE OF PRONOUNCING) THE ORDER ) : THE ORDER ) : THE ORDER ) : 06/06/2007. 06/06/2007. 06/06/2007. ORDER : ORDER : ORDER : 1. This Order will dispose of prayer for interim relief as pressed in the Notice of Motion filed by the Plaintiffs during the pendency of the Suit. The subject Suit has been filed by the Plaintiffs, essentially for declaration and injunction on the claim founded on Section 53 of The Transfer of Property Act, 1882 (hereinafter referred to as ‘the Act’). The Plaintiff Bank is one of the creditor of the Defendant No.1 Company. According to the Plaintiffs, they had filed Suit for recovery of a sum of Rs.4,48,39,822/- (Rupees : 3 : Four Crores Forty-eight Lakhs Thirty-nine Thousand Eight Hundred Twenty-two Only) in this Court against the Defendant No.1 and others being Suit No.4880 of 1998. After the coming into force of the Recovery Of Debts Due To Banks & Financial Institutions Act, 1993 and establishment of the Debts Recovery Tribunal ("D.R.T."), Mumbai in or about October 1999, the said Suit stood transferred to D.R.T.-II, Mumbai and was renumbered as original Application No.1402 of 1999. According to the Plaintiffs, as can be discerned from Paragraph 7 of the Plaint, in the first week of October 1999, they learnt from reliable sources that the Defendants in the said Suit were trying to dispose of their properties to frustrate the claim of the Plaintiffs. For that reason, Plaintiffs moved an application on 13th October 1999, praying for interim relief of injunction against the Defendants in the said proceedings, restraining them from disposing of and/or parting with possession and/or alienating, encumbering and/or creating any right, title or interest in favour of anyone else in respect of and/or inducting anyone into all their properties including their right, title and : 4 : interest in the properties as more particularly described in the Schedule being Exhibit ‘A’ to the said Application, which included immovable property which is the subject matter of the present Suit. The Plaintiffs assert that on 14th October 1999, the D.R.T. was pleased to pass order of injunction against Defendant No.1 herein in the following terms: "Issue temporary injunction against the Defendants that until further orders, they shall not dispose of, alienate, mortgage, transfer or create a charge of any sort over their properties, including the properties in the present loan transaction." 2. The Plaintiffs assert that the said order of injunction was sent by the Plaintiffs under the cover of their letter dated 19th November 1999 to the City Survey Officer, Santacruz (West), Mumbai, intimating the City Survey Office about passing of the injunction order in respect of the property in question. According to the Plaintiffs’ noting regarding the said injunction order has been made in the property register card on 3rd December 1999 : 5 : in respect of the said property. The Plaintiffs further assert that by letter dated 11th January 2000, the Plaintiffs wrote to the City Survey Office for issuance of Index-II after recording injunction order passed by the D.R.T. The Plaintiffs also sent letter to Defendant No.3 with request not to register/accept for registration any document for transfer of the property in question at the instance of Defendant No.1 without prior intimation to the Plaintiffs. After all this, the Plaintiffs claim to have published public notice in the English Newspaper Indian Express dated 29th January 2001. The Plaintiffs further assert in Para 13 of the Plaint that in or about third week of January 2000, the Plaintiffs learnt that Defendant No.1 with a view to defraud the Plaintiffs and all other creditors vide a purported Deed of Assignment dated 17th September 1999 executed on a non-judicial stamp paper of Rs.100/- (Rupees One Hundred), purportedly assigned all their right, title and interest in the immovable property in question to the Defendant No.2 for a meagre consideration of Rs.24,50,000/- (Rupees Twenty-four Lakhs Fifty Thousand) as against the : 6 : estimated market value of the said property to be over Rs.1,00,00,000/- (Rupees One Crore). The Plaintiffs have summed up the circumstances in Para 27 of the Plaint, which according to them would suggest that the transaction in respect of the immovable property in favour of Defendant No.2 by the Defendant No.1 was fraudulent one. It will be apposite to refer to Para 27 of the Plaint, which reads thus: "27. The Plaintiffs state and submit that the aforesaid entire transaction concerning the purported Deed of Assignment purportedly dated 17.9.1999 whereby the Defendant No.1 purportedly transferred the said immovable property described in Exhibit ‘A’ hereto to the Defendant No.2 for the alleged consideration of Rs.24,50,000/- and also the said purported registration of the said purported Deed of Assignment affected by the Defendant No.3 is fraudulent, sham, false, bogus, bad in law, null and void and not binding upon the Plaintiffs and all other creditors of the Defendants No.1 is interalia proved from the following facts: (i) The said purported Deed of Assignment dated 17.9.1999 was executed on a non-judicial stamp paper of Rs.100/- only. (ii) In the consideration clause of the said purported Deed of Assignment where the said purported consideration of Rs.24,50,000/- is purportedly recorded, it : 7 : is not even mentioned as to whether the said purported consideration on Rs.24,50,000/- was received by cash or cheque. (iii) On the date of the said purported Deed of Assignment i.e. on 17.9.1999, indisputably, even the alleged meagre consideration of Rs.24,50,000/- (which was much below the market value of the said immovable property which was above Rs.1 Crore) was not even received/realised by the Defendants No.1. (iv) The Defendants No.1 purportedly recorded the receipt of the said purported consideration by the various purported cheques purportedly issued by the Defendants No.1 by a purported letter dated 17.9.1999. Noticeably, in the said letter, despite the fact that the said purported cheques recorded in the said letter were yet to be encashed on the said date, the said Defendant No.1 chose to record that they received from the Defendants No.2 full consideration money of Rs.24,50,000/- as per the aforesaid purported Deed of Assignment. A copy of the said purported letter dated 17.9.1999 is to be found as Exhibit ‘4’ of the aforesaid Misc.Application bearing Lodg.No.484 of 2001 moved by the Defendant No.2 in the Hon’ble DRT. In this connection, it is noteworthy that even as per the letter dated 17.9.1999 purportedly addressed by the Defendants No.2 to the Defendants No.1 (being Exhibit ‘3’ to the Interim Application moved by the Defendants No.2 in DRT), the said sum of Rs.24,50,000/- was purportedly paid by the Defendants No.2 to the Defendants No.1 by way of five separate cheques drawn upon single account of the Defendant No.2 maintained with the Union Bank of India, the said act on the part of the Defendants No.2 smacks of collusion with the Defendants No.1 in the said fraudulent : 8 : transaction. (v) At the time of lodgment of Deed of Assignment dated 17.9.1999, the Defendants No.1 as aforesaid, had not even obtained the requisite Income Tax Clearance Certificate as contemplated under Section 230A of Income Tax Act. (vi) The order of DRT passed on 14.10.1999 was communicated by the Plaintiffs to the City Survey Office, as aforesaid, by their letter dated 19.11.1999 and the entry thereof was also recorded by the City Survey Office on 3.12.1999. (vii) The office of the Defendant No.3 was also informed about the said order of injunction by the Plaintiffs’ letters dated 11.01.2000 and 27.01.2000 addressed to the Defendant No.3. Even as per the acknowledgement of the Defendant No.3, the copy of the said letter dated 27.1.2000 was received by the Defendant No.3 on 8.2.2000. (viii) The aforesaid requirement of the Income Tax Clearance Certificate under Section 230A of the said Income Tax Act, 1961 was done away by way of an amendment vide Finance Act, 2001 which came into effect only on 1.06.2001. (ix) At least on 8.2.2000, even as per the aforesaid acknowledgement dated 8.2.2000 on the aforesaid letter dated 27.1.2000, the Defendant No.3 was aware of the passing of the said order of injunction which was passed as early as on 14.10.1999 by the Hon’ble DRT preventing the Defendants No.1 from selling/transferring/assigning any of their immovable properties including the immovable property covered by the said purported Deed of Assignment. (x) Consequently, as on 8.2.2000, it was : 9 : well within the knowledge of the Defendants No.3 that in the aforesaid premises and especially in view of the non-removal of the objections pertaining to the market value of the said immovable property covered by the said purported Deed of Assignment and compliance of the said Section 230A of the Income Tax Act, 1961 by the Defendant Nos.1 and 2 even as on the said date i.e. on 8.2.2000, the said purported Deed of Assignment dated 17.9.1999 had continued to remain unregistered and consequently, the immovable property covered by the said Deed continued to be the property of the Defendants No.1. (xi) The Defendant No.3 was also well aware of the fact that in the aforesaid premises, in the teeth of the aforesaid order of injunction dated 14.10.1999 passed by the Hon’ble DRT, it was not at all permissible on the part of the Defendant No.3 to effect registration of the said purported Deed of Assignment on 30.8.2001 or any time after the intimation of the aforesaid order which as aforesaid, was intimated to the Defendant No.3 vide the copies of the aforesaid letters dated 11.1.2000 and 27.1.2000. (xii) Even as per the present market value, on a conservative estimate, the value of the said property in question is well above Rs.1 Crore. The said fact is evident from the valuers report dated 11.12.2001 issued by the government approved valuer N.G.Vaidya and Associates and also a letter of offer dated 24.1.2002 received by the Plaintiffs from one M/s.Sanghvi Pack Products. In the said valuation report, the said valuers have stated that in their opinion, the prevailing market rate of commercial premises in the area (where the aforesaid suit property covered by the said purported Deed of Assignment) ranged : 10 : Rs.3500/- to Rs.4000/- per sq.ft. of built up area. From the reading of the aforesaid purported Deed of Assignment it may be noted that the 2nd floor premises forming part of the said property admeasures approximately 3800 sq.ft. By the said letter of offer, the said M/s.Sanghvi Pack Products have offered to purchase the said suit property for Rs.1,05,00,101/- only. Hereto annexed and marked EXHIBITS "L" and "L-1" are copies of the said valuation report dated 11.12.2001 and the said letter of offer dated 24.1.2002 respectively." 3. On these assertions, the Plaintiffs have approached this Court for the following reliefs: "(a) that this Hon’ble Court be pleased to declare that the said purported assignment of the said immovable property described in Exhibit ‘A’ hereto, purportedly effected by the Defendant No.1 in favour of the Defendant No.2 under the purported Deed of Assignment dated 17.09.1999 is fraudulent, illegal, invalid, null and void, bad in law and not binding upon the Plaintiffs and any other creditors of the Defendants No.1. (b) that this Hon’ble Court be pleased to declare that the purported registration of the said purported Deed of Assignment dated 17.9.1999 purportedly effected by the Defendant No.3 on 30.8.2001 is illegal, invalid, null and void, bad in law and not binding upon the Plaintiffs and any other creditors of the Defendants No.1. : 11 : (c) that this Hon’ble Court be pleased to pass an order and decree quashing and setting aside the aforesaid fraudulent assignment of the said immovable property, described in Exhibit ‘A’ hereto, purportedly effected by the Defendant No.1 to the Defendant No.2 under the purported Deed of Assignment dated 17.9.1999. (d) that this Hon’ble Court be pleased to pass a mandatory order and injunction against the Defendant No.3 ordering and directing the said Defendant No.3 to cancel the said purported registration of the said purported Deed of Assignment being Exhibit ‘G’ to the Plaint purportedly effected on 30.8.2001 by the Respondent No.3. (e) that this Hon’ble Court be pleased to pass permanent order and injunction restraining the Defendants No.1 from selling/alienating/transferring the said immovable property described in Exhibit ‘A’ hereto or creating any encumbrances or any third party rights upon/in respect of the said immovable property described in Exhibit ‘A’ hereto. (f) that this Hon’ble Court be pleased to pass a permanent order and injunction restraining the Defendants No.2 from selling/alienating/transferring the said immovable property described in Exhibit ‘A’ hereto or creating any encumbrances or any third party rights upon/in respect of the said immovable property described in Exhibit ‘A’ hereto. (g) that pending the hearing and final disposal of the suit, this Hon’ble Court be pleased to pass an order and injunction restraining the Defendants No.1 from selling/alienating/transferring the said immovable property described in Exhibit : 12 : ‘A’ hereto or creating any encumbrances or any third party rights in respect of the said immovable property described in Exhibit ‘A’ hereto. (h) that pending the hearing and final disposal of the suit, this Hon’ble Court be pleased to pass an order and injunction restraining the Defendants No.2 from selling/alienating/transferring the said immovable property described in Exhibit ‘A’ hereto or creating any encumbrances or any third party rights in respect of the said immovable property described in Exhibit ‘A’ hereto. (i) that pending the hearing and final disposal of the suit, this Hon’ble Court be pleased to issue a mandatory order and injunction ordering and directing the Defendant No.3 to pass necessary orders suspending the purported registration of the said purported Deed of Assignment being Exhibit ‘G’ to the Plaint purportedly effected by the Defendant No.3 on 30.8.2001. (j) that this Hon’ble Court be pleased to grant leave under Order 1 Rule 8 of C.P.C. 1908 to the Plaintiffs to file the present representative suit on behalf of themselves and all the creditors of the Defendants No.1. (k) that this Hon’ble Court be pleased to grant leave under Section 80(2) of the Code of Civil Procedure, 1908 and permit the Plaintiffs to file the present suit without serving notice as required under Sub-Section (i) of the said Section 80 of the CPC, 1908. (l) for ad-interim reliefs in terms of prayer clauses (g), (h) and (i) above. (m) for such other reliefs as the nature and circumstances of the case may require. : 13 : (n) for costs of the suit." 4. During the pendency of this Suit, the Plaintiffs have taken out present Notice of Motion for the following reliefs: "(a) that pending the hearing and final disposal of the suit, this Hon’ble Court be pleased to pass an order and injunction restraining the Defendants No.1 from selling/alienating/transferring the said immovable property consisting of 1/3rd undivided right title and interest in the premises as available FSI to the extent of 341.5 sq.mtrs. or thereabouts in all that piece or parcel of land lying, being and situate at Village Vyarawali, Taluka Andheri, bearing C.T.S. No.150, Survey No.6, Hissa No.Nil admeasuring 1070.2 sq.mtrs. within the registration Sub-District and District of Bombay City and Bombay Suburban with the building structure standing thereon, together with the benefit of and alongwith the right to use and occupy the second floor admeasuring about 3800 sq.ft. built up area and more particularly described as Exhibit ‘A’ to the Plaint or creating any encumbrances or any third party rights upon/in respect of the said immovable property. (b) that pending the hearing and final disposal of the suit, this Hon’ble Court be pleased to place an order and injunction restraining the Defendants No.2 from selling/alienating/transferring the said immovable property consisting of 1/3rd undivided right title and interest : 14 : in the premises available FSI to the extent of 341.5 sq/mtrs. or thereabouts in all that piece or parcel of land lying, being and situate at Village Vyarawali, Taluka Andheri, bearing C.T.S. No.150, Survey No.6, Hissa No.Nil admeasuring 1070.2 sq.mtrs. within the registration Sub-District and District of Bombay City and Bombay Suburban with the building structure standing thereon, together with the benefit of and along with the right to use and occupy the second floor admeasuring about 3000 sq.ft. built up area and more particularly described in Exhibit ‘A’ to the Plaint or creating any encumbrances or any third party rights upon/in respect of the said immovable property. (c) that pending the hearing and final disposal of the suit, this Hon’ble Court be pleased to issue a mandatory order and injunction ordering and directing the Defendant No.3 to pass necessary orders suspending the purported registration of the said purported Deed of Assignment dated 17.9.1999, being Exhibit ‘G’ to the Plaint, purportedly effected by the Defendant No.3 on 30.8.2001. (d) for ad-interim reliefs in terms of prayers (a), (b) and (c) above. (e) for costs of the notice of motion. (f) for such further and other reliefs as the nature and circumstances of the case may require." 5. The Defendants have filed reply affidavit to oppose grant of any interim relief during the pendency of the Suit as prayed by the Plaintiffs. : 15 : Initially, the Court after considering the pleadings and the rival submissions was pleased to dispose of the Notice of Motion by oral order dated February 14, 2002. The said decision, however, was challenged by the Plaintiffs before the Appellate Bench of this Court. The Appeal was, however, disposed of by consent of the parties vide order dated November 24, 2006 by the Division Bench in Appeal No.275 of 2002 on the following terms : "After arguing the matter for sometime, the senior counsel for the parties agreed for disposal of the appeal by the following order:- (i) Notice of Motion No.454 of 2002 is restored to file. (ii) The respondent no.2 (defendant no.2) shall file reply to the Notice of Motion within four weeks from today with an advance copy to the Advocates on record for the appellant (plaintiff). (iii) The plaintiff shall be at liberty to file rejoinder within three weeks from the date of receipt of the copy of the reply affidavit from the defendant no.2. (iv) The learned Motion Judge is requested to hear and decide the Notice of Motion afresh. (v) Until the disposal of the Notice of Motion, interim order passed in appeal on 19.3.2002 as modified on 27.8.2002 in : 16 : Notice of Motion No.2076 of 2002 (in the Appeal) shall remain operative. (vi) The impugned order stands set aside with the aforesaid direction. (vii) All contentions of the parties are kept open to be agitated before the learned Motion Judge. No costs." 6. Pursuant to the said decision, parties are relegated before the Single Judge of this Court for reconsideration of the Notice of Motion afresh. 7. Accordingly, this Court will have to consider: i) Whether the Plaintiffs have made out a prima facie case? ii) Whether the balance of convenience is in favour of the Plaintiffs? iii) Whether the Plaintiffs will suffer irreparable loss? iv) What order? : 17 : 8. Before proceeding to consider the rival claim, at the outset, it needs to be noted that the declaration claimed by the Plaintiffs in the present Suit is essentially founded on grounds available in terms of Section 53 (1) of the Act. Section 53 of the Act reads thus : "53. Fraudulent transfer.- "53. Fraudulent transfer.- "53. Fraudulent transfer.-(1) Every transfer of immoveable property made with intent to defeat or delay the creditors of the transferor shall be voidable at the option of any creditor so defeated or delayed. Nothing in this sub-section shall impair the rights of a transferee in good faith and for consideration. Nothing in this sub-section shall affect any law for the time being in force relating to insolvency. A suit instituted by a creditor (which terms includes a decree-holder whether he has or has not applied for execution of his decree) to avoid a transfer on the ground that it has been made with intent to defeat or delay the creditors of the transferor shall be instituted on behalf of, or for the benefit of, all the creditors. (2) Every transfer of immoveable property made without consideration with intent to defraud a subsequent transferee shall be voidable at the option of such transferee. : 18 : For the purposes of this sub-section, no transfer made without consideration shall be deemed to have been made with intent to defraud by reason only that a subsequent transfer for consideration was made. 53A.Part performance.- Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof." : 19 : 9. There can be no difficulty in accepting the argument of the Plaintiffs that if the Plaintiffs were to allege and prove that the transfer of immovable property in question has been made by Defendant No.1 in favour of Defendant No.2 with intent to defeat or delay the creditors of the Defendant No.1, said transaction shall be voidable at the option of the Plaintiffs whose claim against the Defendant No.1 was likely to be defeated or delayed. I shall revert to this aspect a little later. What is however significant in Section 53 of the Act is that such right of the creditor is not an absolute right. For, the same is made subject to the right of the transferee of such immovable property in good faith