: 1 : rpa IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO.1128 OF 2009 IN SUIT NO. 704 OF 2009 M/s.Lire Investment Pvt.Ltd. .. Plaintiff V/s. Mr. Naresh Santaram Manghnani & Ors. .. Defendants ..... Mr.Subodh Dharmadhikari, Senior Counsel a/w. Mr.Deven Chauhan i/b.Filji Frederick for the plaintiff Mr.Kishore Jain a/w. Mr.Tushar Goradia & Ms.Nisha Parmar for Defendant Nos. 2 to 4. ..... CORAM : S.C. DHARMADHIKARI, J. DATE : 7th October, 2009. P.C. : These Notice of Motions are moved by the Plaintiffs to seek interim reliefs and more particularly appointment of Court Receiver of the suit property, which are shop bearing Nos. 2,5,6,7,8 and 9 situated on the ground floor of building known as : 2 : Botwala Chambers, P.M.Road, Modi Street, Fort, Mumbai with further directions that the Court Receiver should appoint either a Bank or some other person as an agent so that the property fetches some income during the pendency of the suit. 2. The suit is filed by the Plaintiffs for a declaration that an indenture of lease dated 30th May, 2008 executed by Defendant No.1 in favour of Defendant No.2 is null and void and it is vitiated by a fraud played by Defendant No.1 on the Plaintiff and further that a power of attorney dated 12th July 2007 and registered on 22nd July, 2007, stands revoked as a transaction with Karnataka Bank Limited did not materialize and the suit property was not handed over on sub-lease basis so as to fetch a sizable income. 3. It is stated that the Plaintiff acquired tenancy rights from the 5th Defendants on payment of Rs.10 lakhs as security and on monthly rent of Rs.2018.40 per month. It is stated that the lease agreement is dated 20th July, 2000 and registered. That lease agreement permits the first Defendant to create sub lease rights and based upon that the Plaintiff appointed the first : 3 : Defendants to finalize the Terms of the offers likely to be received. It is submitted that some offers were received and more particularly from Karnataka Bank Limited. The Karnataka Bank limited offered Rs. 5 lakhs as monthly rent and agreed to periodically increase it to Rs.6.25 per month by its offer letter dated 2nd November, 2006, copy of which is is at page 49 of the plaint paper book. However, this transaction did not materialize and subsequently the Plaintiff No.1 appointed the first Defendant as a constituted attorney. It is stated that the Plaintiff No.1 appointed the first Defendants as the Power of Attorney pursuant to a resolution of the Board of Directors. The appointment was to take effect from 12th October, 2007 and was for a limited period for sub-leasing the company’s property i.e. the suit property. Accordingly, the Plaintiff No.1 appointed the Defendant No.1 as a power of attorney and subsequently it is stated that a letter from one Karur Vyasa Bank was received wherein an offer was made by the said Bank to take the premises on sub lease basis on a monthly rent of Rs.3 lakhs and charges for maintenance of Rs.3 lakhs. It is stated that the carpet area approximately is 1800 square feet plus loft. The premises are situate at a prime location and therefore the Plaintiff : 4 : corresponded with the said Bank and my attention is invited to the letter dated 7th January, 2008. It is then urged that even this transaction could not be concluded and ultimately it was found that the first Defendant executed a lease in favour of Defendant No.2. It is stated that it is executed on the basis of the very Power of Attorney and with none others than family members of the first Defendants. The premises which are situated at a prime location have been offered to Defendant No.2 to 4 by Defendant No.1 in furtherance of the Power of Attorney and the deposit is only of Rs.15 lakhs. The lease is permanent and monthly rent is Rs.7500/-. This sub-lease was created in 2008 and to be precise on 20th May, 2008. It is stated that the sub-lease is in perpetuity. There is no resolution of Plaintiff No.1. There is no signature of the Plaintiffs. The sub-lease was not to the knowledge of the Plaintiffs and neither did they approve or sanctioned the same. It is in such circumstances, that the present suit has been filed and more particularly when Defendant Nos.2 to 4 have started claiming rights in the property on the basis of the lease in perpetuity. 4. Mr.Dharmadhikari, learned Senior Counsel appearing : 5 : on behalf of the Plaintiffs submitted that a perusal of the letter of the Defendant No.1 dated 16th September, 2008 states that the first Defendant had an authority to execute a lease deed. By virtue of the said authority, the lease deed has been executed and the lessee has been put in physical possession of the property. However, by virtue of clause 12 of the original lease deed, in favour of the Plaintiff No.1, the sub-lessee will automatically become a Tenant/Lessee of the original land lord, by operation of law. It is contended that there is a false stand taken by Defendant No.3 who has filed a reply on behalf of Defendant No. 2 to 4 that Plaintiffs are aware of the transaction. However, no documents much less any resolution has been placed on record so as to demonstrate that the Plaintiffs have knowledge of the transaction. My attention is invited to the affidavit of Defendant No.3 and it is urged that in this affidavit a false statement is made that the Plaintiff No.1 had agreed to lease out the suit premises to Defendant No.2 on the terms and conditions set out in the lease deed and that the plaintiff is very well aware of the entire transaction. It is urged that this statement is coming from the Defendant No.3 with whom there is absolutely no privity in as much as the Power of Attorney is in favour of the first : 6 : Defendant and it is he who has executed the sub-lease deed in favour of the Defendant Nos. 2 to 4. In these circumstances, by this statement, knowledge cannot be attributed to the Plaintiffs. Further, the Defendant No.1 has taken advantage of the Power of Attorney and has inducted his family members in these valuable premises. Therefore, section 215 of the Contract Act comes into play. The Plaintiffs have made out a prima facie case of fraud or in any event a case of Distinct disadvantage to them by the acts of their Agent. In these circumstances, they would be justified in repudiating the transaction. 5. Mr.Dharmadhikari emphasises that the premises have not been used by Defendant Nos. 2 to 4, although they claim to be in possession thereof and that they have placed a lock on the same. In these circumstances, restraint against creating of third party interest would not suffice and this is a case where it is just and convenient to appoint a Court Receiver. Moreso, when the plaintiffs are loosing a sizable income from the valuable property in Bombay. If the offer itself was of not less than of Rs.5 lakhs per month, then, in comparison a sum of Rs.7500/- per month can hardly be set to be a fair return. In these circumstances, and : 7 : when the sum of Rs.5 lakhs is clandestinely deposited in the Plaintiffs Bank Account at Bombay and Banglore, a strong prima facie case is made out for appointment of Court Receiver. The element of balance of convenience and irreparable loss is also satisfied. The fraud being clear, the Court Receiver must step in. 6. In support of these submissions, Mr.Dharmadhikari placed reliance upon the following decisions : “1. AIR 1928 Lahore 196 – Firm Mathra Das Jagan Nath V/s. Firm Jiwan Mal Gian Chand. 2. AIR 1922 Madras 497 – Achutha Naidu – Messrs Oakley Bowden and Co. and others. 3. AIR 1955 Madras 571 – Muniammal V/s.P.M.Ranganatha Nayagar & Others. 4. AIR 1955 Madras 430 – T.Krishnaswamy Chetty V/s. Thangavelu Chetty & Ors. 5. AIR 1998 Bombay 87 – Mulji Umershi Shah & Ect. V/s. Paradisia Builders Pvt.Ltd.Mumbai. 6. (1992) 1 SCC 534 – Shrisht Dhawan V/s.M/s. Shaw Brothers. 7. (1996) 11 SCC 655 – Bhatori V/s.Ram Piari.” 7. On the other hand, Mr. Jain appearing on behalf of : 8 : Defendant Nos.2 to 4 submits that the Plaintiff have come with a false case in as much as if the prayers in the plaint are perused together with the plaints averments, then, it is the plaintiffs own case that they are in possession of the suit property and continue to be in possession. The Plaintiffs may have urged that Defendant Nos. 2 to 4 claim to be in possession of the suit property, but, when they assert that they are in physical possession of the property, then, Plaintiffs cannot seek appointment of a Court Receiver. There are serious and debatable issues in as much as Judicial Notice must be taken of the fact that the plaintiffs acquired the premises on tenancy basis in the year 2000 and till the year 2007 they could not derive any income or benefit from these rights granted in their favour. They could not, despite efforts of their agent, procure any person to acquire the rights in the suit property on sub-lease basis. Therefore, they appointed the Defendant No.1 as a power of Attorney holder. The Defendant No.1 was making efforts from July/October-2007 and it is only in the month of May 2008 that the sub-lease rights were created. Further, no grievance has been made from May 2008 till the filing of the suit with regard to the rights created by the first Defendant. In such circumstances, the : 9 : suit is not bonafide. It is only because certain matters in relation to Accounts could not be resolved that the Plaintiffs have chosen to file this suit. Once the Plaintiffs have conferred the rights in favour of Defendant No.1 and he has executed the sub-lease, then, the Defendant Nos. 2 to 4 cannot be ousted from the suit premises by appointment of a Court Receiver. More so, when they are in physical possession thereof, they have obtained telephone, electricity and other basic amenities. They are maintaining the premises. They are using it and presently the same is being used for doing business in Kitchenware. In these circumstances, the Notice of Motion be dismissed and the statement and undertaking given to the court are sufficient protection of the rights of the Plaintiffs in respect of the suit property. 8. Upon a query from the Court and after taking instructions, Mr.Jain submits that his clients may be allowed to continue in the premises during the pendency of the suit subject to such terms as this court deems fit and proper including reasonable enhancement in the sum presently paid as monthly rent. Mr.Dharmadhikari states that the Plaintiffs have not : 10 : accepted the monthly rent of Rs.7,500/- and they have returned all cheques forwarded in that behalf. 9. Having heard the learned counsel appearing for the respective parties and perused with their assistance, the relevant materials including annexures to the Plaint, I am of the opinion that at this stage, it is not just and convenient to appoint a Court Receiver. The suit is filed on the basis that the Plaintiffs, although, permitted the first Defendant to create sub-lease rights, taking advantage of the long term relations and the execution of the Power of Attorney, he has inducted Defendant Nos. 2 to 4. The Plaintiffs have stated that they have received offers for sub- lease rights in respect of the premises from some Banks, but, it is apparent that neither of the offer has materialized. In the Plaint itself, it is stated that continuous efforts were made to search a suitable party, but, for some or other reason, the transaction could not materialize and finalized. It is only when some communications were going on with Karur Vyasa Bank that the Plaintiffs became aware of the sub-lease. The sub-lease is stated to have been discovered in June-2008 and thereafter the attempts to obtain a copy thereof were undertaken. After the : 11 : copy of the sub-lease was made available, the fraud come to notice and that is how the instant suit is filed. However, it is apparent from the plaint averments that from 2000 to 2007-08 the Plaintiffs could not execute any sub-lease with either any bank or other parties. Therefore, it is not as if the Plaintiffs were straightway entitled to the sum that is stated to be offered. 10. However, considering that the allegations of fraud are made, which although denied, but finding that even Defendant Nos. 2 to 4 are closely related to Defendant No.1 , this is a case where interest of justice would be sub-served if the Defendant Nos. 2 to 4 are allowed to occupy the suit property on some terms in addition to the undertaking given to this Court and the order passed restraining them from creating any third party rights. The first Defendant has not filed any affidavit in reply and that would have some bearing on the controversy. At this prima facie stage, and considering that the Plaintiffs have asserted that they have terminated the Power of Attorney, then, it cannot be said that the Defendant Nos. 2 to 4 should occupy the valuable immovable property in the heart of the city on a meagre rent. More so, when it is not denied that the premises : 12 : can fetch a higher rent. Assuming that the terms and conditions of the lease permitting creation of and further sub-lease assuming that the sub-lease is still valid and not held to be vitiated, yet the plaintiffs rights being not disputed, then, the following orders will sub-serve the ends of justice. More so, when the property is admeasuring about 1800 square feet. :: O R D E R :: i. It is directed that the Defendant Nos. 2 to 4 shall deposit a sum of Rs.25,000/- in this Court every month and first of such deposit shall be made on or before 10th November, 2009 and thereafter on 10th day of each subsequent month until the suit is heard and disposed of. ii. Any two defaults in deposit of the amount shall result in the Court Receiver, High Court Bombay being appointed as a Receiver of the suit premises with all powers including taking physical possession thereof from Defendant Nos. 2 to 4 on failure of the Defendant Nos. 2 to 4 to execute the Agency agreement with the Court Receiver and paying the royalty/compensation determined by the Court Receiver. : 13 : Thereupon the Court Receiver shall invite bids from third party for being appointed as his agent on such terms and conditions as he may deem just and proper. iii. In case deposits are made as directed above, the Prothonotary and Senior Master to invest the sums in a Fixed Deposit with a Nationalized Bank and abide by further orders and directions of this Court. iv. Both notice of motions stand disposed of. v. This order is passed because it is asserted repeatedly by Defendant Nos. 2 to 4 i.e. M/s. Paramount Enterprises and Defendant Nos. 3 and 4 as their partners are in possession of the suit premises and the said firm has only two partners, namely Defendant Nos. 3 and 4. A grievance is made that taking advantage of the order of this Court, any reconstitution of the firm should not be undertaken so as to induct new partners. Thereafter, it would be prejudicial to the rights of the Plaintiffs as some other claims may intervene. Mr.Jain on instructions states that the Defendant Nos.2 to 4 shall not alter the present composition of the second Defendant firm by inducting any new partners and if at any stage they desire to do so, they : 14 : shall apply for prior leave of the Court. vi. The order of deposit so also the order passed today is without prejudice to the rights and contentions of both sides and shall not preclude them from raising appropriate pleas including the maintainability of this suit. (S.C. DHARMADHIKARI, J.)