1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO.3631 OF 2006 IN SUIT NO.940 OF 1998 Mohanlal Talreja & Ors. .. Plaintiffs Versus Sham Pundalik Dhumatkar & Ors. .. Defendants Mr.Sanjay Jain with Mr.Ramesh Jain for plaintiffs Mr.K.N.Kore for defendant Nos. 1 and 2 Mr.S.Chavan i/b. M.V.Kini & Co. for defendant No.3 CORAM : S.C.DHARMADHIKARI, J. DATE : 5th January 2009. P.C. . This is a notice of motion by the plaintiffs. 2. In my orders passed from time to time, I had observed that out of the reliefs sought what now remain for consideration are prayer clauses (c), (e) and (f). 2 3. However, for the reasons indicated hereinafter, no relief in terms of prayer clause (f) can be granted. 4. On 12th November 2008, this matter had appeared before me and I heard arguments of both sides but had granted time to defendant Nos.1 to 3 to place an affidavit before this Court to comply with the orders made on 17th October 2006 and to hand over the original documents to the Court Receiver, who has been appointed receiver of the suit property. 5. Despite adjournments being granted, the affidavit was not filed and ultimately the matter was placed before the Court on 15th December 2008, when once again I recorded the fact that the defendant Nos. 1 and 2 have not complied with the orders passed by this Court. 3 6. I had recorded that defendant No.3 has filed an affidavit and has stated that the agreement which was entered into by defendant Nos. 1 and 2 with their vendors on 23rd January 1991, is not with the third defendant. In other words, the third defendant does not have the original agreement. 7. That the said agreement has not been produced, was the grievance through out. That was noted in my order passed on 15th December 2008. The matter was adjourned to 1th December 2008 and Mr.Kore appearing for defendant Nos. 1 and 2 stated that defendant No.1 is ailing and, therefore, was unable to attend the Court. As far as Defendant No.1 is concerned, he has already filed an affidavit on 13th December 2007 and has tendered a further affidavit in this Court. My attention is invited to paras 6 and 7 of this affidavit and it is contended by Mr.Kore that the suit itself is placed for framing issues 4 and, therefore, no order striking off the defence of the defendant Nos. 1 and 2 can be passed in these proceedings. Further, the original documents are with defendant No.3 being mortgagee and, therefore, the Court Receiver cannot be assisted by defendant Nos. 1 and 2 insofar as placing the original agreement with him. That is an aspect which must be taken up by the Court Receiver with defendant No.3. 8. That apart, it is contended by Mr.Kore that the suit itself is premature. The suit is filed to seek specific performance of an agreement for sale. It is contended that the suit is based upon an agreement which itself contains a stipulation that the original document is with the third defendant and, therefore, unless and until the plaintiffs satisfy the Court that they are ready and willing to perform their part of contract and that they are entitled to specific performance of this agreement, no 5 question arises of defendant Nos. 1 and 2 producing original documents or placing the same on record of this Court otherwise. In such circumstances, no relief be granted in this motion. More so, when the Court Receiver has already taken possession from defendant Nos. 1 and 2. 9. The matter was placed for orders today after I had extensively heard the parties. The matter was placed today soas to enable defendant Nos. 1 and 2 to still comply with the orders of this Court before they face serious consequences. However, Mr.Kore states that the defendant No.1 is unwell and he has no instructions as far as defendant No.2 is concerned. He fairly stated that the Court should proceed to dispose of this motion on the basis of the available material. 10. The suit is filed by plaintiff for specific performance of an agreement for sale/ 6 MOU dated 18th September 1997. The details of the transaction are set out in the plaint and it is stated that the plaintiffs have paid Rs.1 lakh on execution of the MOU and the balance consideration was payable on defendant Nos. 1 and 2 handing over peaceful and vacant possession of the suit premises to the plaintiffs, after obtaining NOC from the Coop.Housing society. It is also stated in the plaint that the title deeds viz., original agreement dated 1st November 1990 between A.N.Properties and Investments Ltd. and Defendant Nos. 1 and 2 together with original share certificate No.90 which was deposited with defendant No.3 as and by way of equitable mortgage should be handed over. In para 4 of the plaint, it is stated that the plaintiffs have paid a sum of Rs.8,50,000/- and further sum of Rs.1 lakhs has been paid on 24th November 1997. Thereafter, further facts are set out and it is stated that the plaintiffs are ready and willing to comply with their obligations under the 7 Agreement/ MOU and they were always ready and willing to do so. It is alleged that defendant Nos. 1 and 2 have failed and neglected to comply with their obligations. These allegations are to be found in paras 12 and 13 of the plaint. Thereafter, the prayers follow. 11. The present notice of motion prays that after the suit was filed, application for interim relief was moved and this Court directed that defendants shall maintain status quo regarding the property in question and shall not further transfer, alienate or encumber or create any third party interest in the subject property. The order was passed after recording statement of the Advocate appearing for defendant Nos. 1 and 2. This order was passed on 9th March 1998. Thereafter, this Court passed a further order on 4th May 1999 and the notice of motion taken out by the plaintiffs being Notice of Motion No.915 of 1998 was made absolute in terms of prayer 8 clause (a) thereof, save and except that it was directed that the Receiver should not sell the property. The Court Receiver was to appoint defendant Nos. 1 and 2 as agents on royalty which should be equivalent with the society outgoings per month. The Court Receiver was to also collect the arrears of society dues and pay the same to the society. 12. This Court was moved again on 17th June 1999 and it was stated that the order passed earlier was ex parte but the Court refused to recall that order as is clear from the order passed on Notice of Motion No.1560 of 1998, a copy of which is annexed as Annexure "C" to the affidavit in support of the present Notice of Motion. 13. It is in such circumstances and alleging that there was considerable delay in entering into the Agency Agreement and there was default 9 in payment of royalty charges etc. that the present Motion is moved. The royalty charges remained in default in the manner set out in the affidavit. It is not necessary to enter into this controversy, inasmuch as the Court Receiver has now taken possession from defendant Nos. 1 and 2. In paras 24, 25 and 26 of the affidavit in support, this is what is stated:- "24. No action was taken by the Court Receiver, High Court, Mumbai upon the visits of the plaintiffs to the office of the Court Receiver, for taking follow up action. The plaintiffs learnt from the office of the Court Receiver that certain documents have bee forwarded to the office of the Court Receiver, wherefrom it appeared that defendant Nos. 1 and 2 had procured a loan of Rs.30,00,000/- from Syndicate Bank on the basis of alleged Security of the office premises 10 without the permission from this Hon’ble Court. The Plaintiff obtained copies of the documents from the office of the Court Receiver. The documents obtained are:- (i) Confirmation of deposit of title deeds confirming an alleged deposit of title deeds in respect of the office premises by defendant Nos. 1 and 2 to Syndicate Bank for a loan of Rs.30,00,000/- advanced by the said Syndicate Bank to one Gayatri Dhumatkar; (ii) an extract of E.M.Register; (iii) Copy of Share Certificate issued by the said Society; 11 (iv) An alleged letter allegedly dated 8th September 2003, allegedly issued by the said society to the Chief Manager, Syndicate Bank granting no objection for creation of lien in favour of the Syndicate Bank; and (v) copy of agreement dated 23rd January 1991 in respect of the said Office Premises; "25. Thus, it now transpires that the apprehension expressed by the plaintiffs in their various letters to the Court Receiver, have turned out to be true. The Court Receiver failed to take timely action against defendant Nos. 1 and 2. Defendants No.1 and 2 illegally, 12 unauthorisedly, in breach and violation of the orders passed by this Hon’ble Court, the Agency Agreement, the undertaking given by them to the Court Receiver and to this Hon’ble Court and in a fraudulent and dishonest manner have attempted to create third party rights in respect of property custodia legis. Such encumbrance is illegal, invalid, null and void. The same is of no consequence. However, the breach by defendant Nos. 1 and 2 is glaring. The plaintiffs will initiate appropriate proceedings against defendant Nos. 1 and 2 for having committed contempt of this Hon’ble Court. However, in the mean time defendant Nos. 1 and 2 cannot be permitted to continue to act as agents of the Court Receiver. "26. The plaintiffs also learnt from the office of the Court Receiver that the 13 said society by its letter dated 18th October 2005, had categorically informed the Court Receiver, that the alleged letter of the said society submitted by defendant Nos. 1 and 2 to Syndicate Bank was a forged and fabricated document and that the same had not been issued by the said society. Despite having knowledge about the fraudulent conduct of defendant Nos. 1 and 2, atleast since 18th October 2005, the Court Receiver, High Court, Mumbai did not take any action against defendant Nos.1 and 2." 14. It is in such circumstances that Mr.Jain appearing for plaintiffs has contended that the defendant Nos. 1 and 2 have committed breach of the undertaking given by them to this Court. They had undertaken not to deal with the property which is custodia legis. The effect of the order appointing the Court Receiver is such that the 14 parties should maintain status quo with regard to the property in dispute and that the Court Receiver holds the same till the outcome of the litigation. Despite the property being custodia legis, an attempt was made to deal with it in the manner set out in the affidavit and, therefore, this is a fit case to strike off the defence of defendant Nos. 1 and 2. 15. My attention is also invited to an order dated 17th October 2006 passed by this Court on this Motion (Vazifdar, J) and more particularly para 2 thereof, which reads as under:- "2. In view of the statement it is not necessary to consider this application at this stage. However, ad-interim order in terms of prayer (e), to be complied with within a period of eight weeks from today." 15 16. Prayer clause (e) of this motion was for an order and direction to defendant Nos. 1 and 2 to disclose on oath the properties, both moveables and immovable which are owned by them and/or in their possession and they were to file such an affidavit within eight weeks from 17th October 2006. 17. Mr.Jain has contended that there is a breach of the order and direction in this behalf as well, as no affidavit has been filed disclosing the immovable and moveable properties. For all these reasons, this is a fit case were the relief under Order XXXIX Rule 11 be granted as prayed in the notice of motion. 18. My attention is also invited to Order XXXIX Rule 11 of C.P.C. which is applicable in the State of Maharashtra. It is contended that the provisions are unaffected by the amendments to C.P.C. made in the year 2002. While it is 16 true that the provisions are directory and not mandatory as earlier held, It is contended by Mr.Jain that this Court has ample powers to pass orders by which it ensures that parties do not defeat and frustrate the directions issued to them during the course of their litigation. The object and purpose of inserting Order XXXIX Rule 11 to the C.P.C. is that the parties should abide by the orders and directions of the Court or else face the consequences. As far as defendants are concerned, consequences are that their defence can be struck off. In this behalf, reliance is placed upon a Division Bench decision of this Court reported in A.I.R. 2004 Bom.212 (Ramavatar Surajmal Modi Vs. Mulchand Surajmal Modi). 19. On the other hand, Mr.Kore would urge that the motion itself is not tenable at this stage. This is not a case where the defendant Nos. 1 and 2 have not abided by the orders and 17 directions of this Court, inasmuch as this Court has not decided the matter finally. All that has been done is that at a prima facie stage, the Court appointed Court Receiver but now defendant Nos. 1 and 2 are no longer Agents of the Court Receiver. The developments which are highlighted in the affidavit touch the merits of the case and whether there is any encumbrance created on the property is something which this Court will decide at the hearing of the suit and, therefore, there is no occasion for striking off the defence. That apart, the affidavits filed, duly comply with the orders and directions. 20. With the assistance of the learned Counsel appearing for parties, I have perused the motion and the annexures thereto and the affidavits filed in support and reply. On 13th December 2007, an affidavit has been filed on behalf of defendant Nos. 1 and 2 and it is stated that the defendant No.1 suffers from 18 Asthama and reference is made to some orders that have been passed in a Chamber Summons and notice of motion but the fact remains that there is no compliance with the order passed on 17th October 2006 directing disclosure of the properties of defendant Nos. 1 and 2. In the affidavit filed by defendant Nos. 1 and 2 on 6th December 2007, it is stated that the plaintiffs are guilty of non compliance with the orders passed by this Court on 13th February 2007 and 23rd April 2007 and, therefore, this motion deserves to be dismissed. It is stated that the defendant Nos.1 and 2 raised Educational Loan of Rs.15 lakhs for sending their children to foreign countries for higher education and have repaid the said amount. The receipts and certificates are obtained from the Bank. Nothing is, therefore, due and payable to the bank. However, it is admitted that "the said suit flat was offered as collateral security and not as a mortgage.". An affidavit was, therefore, directed to be filed by defendant 19 No.3. In the meanwhile, there is an additional affidavit filed by defendant No.1 and as far as the paras 24 to 26 of the affidavit in support are concerned, there are no denials of the same. On the other hand, it is stated that once the Court Receiver has taken possession from these defendants, then, nothing survives in the motion further. In para 24 of the affidavit in reply of defendant Nos. 1 and 2, this is what is stated by defendant No.1:- "24. With reference to para 24 I say that, I had obtained two education loans of Rs.15,00,000/- each for higher education of my daughter Miss.Gayatri and son Mr.Om by sending them to Australia against Fixed Deposit Receipts from the Syndicate Bank and I have shown suit premises as a collateral security and I have already repaid the said loans and have obtained certificate from the 20 Syndicate Bank. However, a huge capital was made on that ground and the arrears of royalty and the arrangement with C.R. and me as Agent of C.R. commencing from 1999 to 2006 is terminated and since the possession has been taken by C.R. my business of export suffers and my employees are made to suffer in view of my abovesaid statement, the averment in the aforesaid para does not survive." 21. As stated above, there is no denial of the facts set out in paras 25 and 26 of the affidavit in support of the motion. 22. In such circumstances, in the rejoinder affidavit filed by the plaintiffs, they invited Court’s attention to the breaches of the orders and directions and pointed out that the attempt to deal with the property is admitted. The property was dealt with when the Court Receiver 21 was appointed by this Court. It is contended that such an act amounts to interfering with the possession of the Receiver and, therefore, the relief as prayed for i.e. striking off the defence be granted as a case is made out in that behalf. Additionally, my attention is invited to para 33 of this rejoinder and it is contended that plaintiffs have now come to know that defendant Nos. 1 and 2 took loan of Rs.25 lakhs from H.S.B.C. Bank, M.G.Road Branch, Mumbai and this was once again by securing it by the suit property. The plaintiff wrote a letter pointing out this fact to the Receiver on 18th October 2007. The Receiver addressed a letter dated 29th October 2007 to the concerned Bank calling upon the bank to furnish particulars. There are reminders addressed but the Bank and defendant Nos. 1 and 2 have not replied to the letters nor have controverted the statements in these letters. In such circumstances, the relief prayed should be granted. 22 23. This affidavit in rejoinder is dated 31st March 2008 and a copy thereof has been duly served on defendant Nos. 1 and 2. 24. As observed above, on 17th December 2008, an affidavit has been filed by the defendant Nos. 1 and 2 and in para 3 of the same, these defendants have stated thus:- "3. I say that the suit premises are already mortgaged to the City Bank i.e. the defendant No.3 and all the original documents have been already hypothecated to the defendant No.3 and after redemption of the documents were to be transferred to these defendants. This position is reflecting in the order passed by His Lordship Justice R.M.Lodha on 9th March 1998. I say that, the defendant No.3 has already filed a suit 23 in this Hon’ble Court for recovery of the amount which is still pending." 25. It is in such circumstances that Mr.Kore contends that defendant Nos. 1 and 2 should be given an opportunity to point out that the suit claim is not tenable and that the suit deserves to be dismissed. This liberty should not be taken away merely because the Court Receiver has been appointed or that some directions are issued by this Court to defendant Nos. 1 and 2. 26. It is not possible to accept this contention of Mr.Kore for obvious reasons. It is not as if the defendant Nos. 1 and 2 are not aware of the order dated 17th October 2006 passed by this Court in the present notice of motion. That order was passed in their presence as is clear from the order itself. It is clear that some time was given to them to disclose the properties and no such disclosure has been made 24 on affidavit as is clear from the facts narrated above. The admitted position is that this order and direction is final and not challenged by defendant Nos. 1 and 2. They have not made any attempt to comply with this order and direction of the Court. In such circumstances, this order is clearly breached and violated for which all consequences in law should follow. As far as attempt to deal with the property when the same is custodia legis is concerned, even that has been admitted. Once the Receiver was appointed by this Court and the property is custodia legis, any attempt to deal with it would certainly amount to interference with the possession of the Receiver. It was the plain duty of defendant Nos. 1 and 2 to have sought leave of this Court to deal with the property. They made no such application and continued to deal with the property. It is no answer that some Educational Loan was raised and the property was a collateral security for that loan. How the suit property 25 could have been offered as a security, when this Court had directed the Court Receiver to take possession thereof and to appoint defendant Nos. 1 and 2 as Agents is not clear to me at all. Once the defendant Nos. 1 and 2 were appointed as agents of the Court Receiver and were in possession of the property in that capacity, then, prima facie, they cannot contend that their ownership rights enable them to deal with the property and place/offer it as a collateral security. That could only have been done with prior leave and permission of the Court. Admittedly, no such leave or prior sanction is obtained. There are no denials of these facts which are placed on affidavit before me. 27. It is in such circumstances that the law laid down by this Court would apply to this case. I am aware of the fact that Order striking off the defence ought not to be passed merely because the parties pray to the Court to do so. These 26 orders have serious consequence, inasmuch as, the suit can be dismissed or if defendants are in default, then, their defence can be strike off. The principles laid down in the Supreme Court decisions are referred to by the Division Bench in its judgement. Applying them to the facts and circumstances of the present case and being aware that the powers are directory, yet, if the breach committed by the defendant Nos. 1 and 2 is of the above nature, then, it cannot be condoned as is urged by their Counsel. That would mean that this Court’s orders and directions can be flouted with impunity and parties face no consequences. If Court Receiver’s possession is sought to be interfered with, the Court is powerless in the matter. That would be sending wrong signals to the litigants as they would take orders and directions of the Court casually and lightly. That ultimately will destroy the faith and trust of the people in the Administration of Justice. All that has to be avoided and can be avoided, 27 provided the Court takes stringent measures in that behalf. 28. It is not necessary to make a reference to the decision cited by Mr.Kore, reported in 2008 (8) S.C.C. 564 (K.B.Saha and Sons Vs. Development Consultant Ltd.) This is a suit seeking relief of specific performance which relief by its nature is discretionary. It is not as if the defence being struck off that the defendant Nos. 1 and 2 cannot participate in the proceedings. The consequences would be that they can disprove the case of plaintiffs by cross examining the plaintiffs and their witnesses. Even if their written statement is on record, they would not be entitled to prove their own case or place it before the Court otherwise. This clearly means that they could not be prevented from contending before the Court that the MOU/ Agreement is not enforceable in law or that plaintiffs’ conduct