1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL JURISDICTION NOTICE OF MOTION NO. 248 OF 2008 IN SUIT NO. 198 OF 2008 Mr. Bhagwandas Laxmichand Shah and Ors. .... Plaintiffs. V/s. Union of India through Aayakar Bhavan & Ors. .... Defendants. ....... Mr. K.R. Bulchandani i/b. M/s. Kamal & Co. for the Plaintiffs. Ms. S.I. Shah for the Defendants. ........ CORAM : DR. D.Y. CHANDRACHUD, J. 28TH FEBRUARY 2008. P.C. :- The relief which has been sought in the Notice of Motion is (i) A stay on the operation of an order of attachment dated 25th April 2007 in respect of immovable property situated at 64/69, Dr. Mascarenhas Road, Mazgaon, Mumbai and (ii) An order of injunction restraining the Union of India, the Commissioner of Customs and the Assistant 2 Commissioner, Tax Recovery Cell (Export) from acting further to the notice of Attachment. 2. On 4th August 1987, an order in original was passed by the Collector of Customs, New Customs House, Mumbai in exercise of the power of adjudication conferred by the Customs Act, 1962. The adjudicating authority found that a partnership firm by the name of M/s. N. Devidas & Co was liable to pay an amount of Rs.2,83,43,821/-. Personal penalties were imposed on the firm and its partners. The partnership firm at the relevant time had five partners (i) Mr. Chandrakant Virchand Shah; (ii) Mr. Rameshchandra Virchand Shah; (iii) Mr. Niranjan Devidas Shah; (iv) Mr. Jaykant Devidas Shah and (v) Mr. Vijay Devidas Shah. At the material time, the partners were detained under the COFEPOSA and hence, the order in original was dispatched to the Superintendent of Prisons, Nasik Road Central Prison, Nasik. The Tax Recovery Cell of the Customs Department served an Attachment notice to the partnership firm and its partners on 28th February 2007. The Collector of Mumbai City informed the Commissioner of Customs by a letter received on 25th July 2007 that the 3 immovable property at Mazgaon (to which the motion relates) stood in the name of two of the partners namely Niranjan and Jaykant Devidas Shah. A letter was also received from the Municipal Corporation of Greater Mumbai through its Assessor and Collector in the `E' Ward that the property was reflected in the records of the Municipal Corporation as being owned by the partnership firm of M/s. N. Devidas & Co. 3. In this background, it would be necessary to scrutinize the case which has been made out in the motion before the Court. The Plaintiffs are the Executors of the Will of Smt. Kusumben Virchand Shah. Letters of Administration have been granted to the Plaintiffs on 4th May 2007. By her Will of 4th May 2003, the testatrix has purported to state that all her movables and immovables including the property at Mazgaon shall after the payment of all taxes and any kind of liabilities be distributed among the members of the family of her sons in the ratio stated therein. Some time in the year 1988, a suit was instituted on the Original Side of this Court (Suit 328 of 1988) to which inter-alia the deceased testatrix Kusumben was impleaded as Seventh Defendant. Consent terms were arrived at therein. The consent terms envisaged 4 that three flats reflected in clause 3 therein would be sold by private treaty towards realization of the decretal debt of Rs.3.35 crores outstanding to the Plaintiffs and that the remaining mortgaged properties would be handed over to and would vest in the Seventh Defendant, namely Kusumben. Consequential provisions were contained in clause 7 of the Consent Terms recording an internal family arrangement under which all the remaining properties and assets of the partnership firm, M/s. N. Devilal & Co. were to belong to the Seventh Defendant, Kusumben. The Consent Terms which were arrived in the suit were taken on the record on 30th October 2001. In terms thereof, the suit came to be disposed of. 4. The submission which has been urged before the Court is that as a result of the Consent Terms which were arrived at before the Court on 30th October 2001, more particularly clause 7 which reflects a family arrangement, all the properties of the partnership firm – M/s. N. Devilal & Co. became properties of Kusumben. Consequently, according to the submission urged on behalf of the Plaintiffs, the property at Mazgaon belonged to Kusumben against whom there is no claim of the 5 Government of India. The submission is that it was the partnership firm and its partners who were defaulters under the order of adjudication passed on 4th August 1987 under the Customs Act, 1962. Kusumben who became the owner of the property was not a defaulter and it has been urged that the Plaintiffs as the Executors of her Will are entitled to seek raising of the order of Attachment. On the other hand, it has been urged on behalf of the Defendants that prima-facie, the communication received from the Collector of Mumbai City and the Municipal Corporation would show that the property continues to stand in the names of two partners of M/s. N. Devidas & Co. and that any internal arrangement which was arrived at between the members of the family in the form of the Consent Terms in the suit cannot operate to divest the over-riding charge in favour of the Government of India arising out of the order of adjudication. 5. In my view, there is merit in the defence. The Consent Terms were arrived at in Suit 328 of 1988, on 30th October 2001, which was after the order of adjudication that came to be passed by the Commissioner of Customs on 4th August 1987. The order of 6 adjudication continues to hold the field and it is an admitted position before the Court that no steps have been taken for impugning the legality or validity of the order of Adjudication. The Consent Terms which parties may enter into in a suit constitute a private contract between contesting parties to which the imprimatur of the Court is appended. Such consent terms cannot operate to divest a valid claim of the revenue arising on account of dues that are found to be outstanding upon a duly constituted adjudication in accordance with law. In fact, it would be of some significance to note that after the Attachment was levied, some of the partners of the partnership firm namely Mr. Niranjan Shah , Mr. Jaykant Shah, Mr. Rameshchandra Shah and Mr. Vijay Shah have in pursuance of the order of adjudication purported to deposit in part the penalty each in the amount of Rs.25,000/- with the Assistant Commissioner of Customs. 6. There is no material forthcoming on the record to lead the Court to hold that prima-facie, the Government of India has proceeded to take action by levying an Attachment against a party who is not a defaulter. The burden in such a case must clearly lie upon a party 7 which seeks raising of the Attachment to demonstrate by means of cogent documentary material that an Attachment has been levied other than in respect of the property of the defaulter. That burden has not been displaced. An internal arrangement between the partners of M/s. N. Devilal & Co., albeit in the form of Consent Terms after the order of adjudication cannot operate to divest the Union Government of its overriding and paramount claim arising out of the order of adjudication. 7. In these circumstances, no case has been made out for lifting the order of Attachment or for the grant of an interlocutory injunction restraining the Union Government from taking recourse to its remedies for the realization of its dues under the order of adjudication. 8. The motion shall accordingly stand dismissed. However, with a view to enable the Plaintiffs to seek recourse to their remedies in Appeal, there shall be direction to the effect that no sale shall be conducted for a period of four weeks from today. ------