AO/159/2008 1/38 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD APPEAL FROM ORDER No. 159 of 2008 With CIVIL APPLICATION No. 6094 of 2008 In APPEAL FROM ORDER No. 159 of 2008 For Approval and Signature: HONOURABLE MR.JUSTICE M.R. SHAH ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? NO 2 To be referred to the Reporter or not ? NO 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? NO 5 Whether it is to be circulated to the civil judge ? NO ========================================================= NANABHAI MADHUBHAI ROAYALA & 8 - Appellant(s) Versus MEGHDOOT DYEING & PRINTING MILLS LTD & 7 - Respondent(s) ========================================================= Appearance : MR MIHIR JOSHI, SR.ADVOCATE WITH MR DP KINARIWALA for Appellant(s) : 1 - 9. MR AY KOGJE for Respondent(s) : 1, 3, 5, SERVED BY AFFIX.(N) for Respondent(s) : 2, 8, MR PK PANCHOLI for Respondent(s) : 4, MR SB VAKIL, SR.ADVOCATE WITH MS ARCHANA R ACHARYA for Respondent(s) : 6, NOTICE SERVED for Respondent(s) : 7, ========================================================= CORAM : HONOURABLE MR.JUSTICE M.R. SHAH Date : 16/12/2008 AO/159/2008 2/38 JUDGMENT ORAL JUDGMENT 1. Present appeal from order under Order 43 Rule 1 of the Code of Civil Procedure is filed by the appellants-original plaintiffs through their power of attorney Shri Jitendrabhai N.Royala challenging the impugned order passed by the learned 2nd Additional Senior Civil Judge, Navsari, dated 25.4.2008 passed below Exh.5 in Special Civil Suit No.38 of 2007 by which the learned trial court has rejected the said application submitted by the appellants-original plaintiffs (hereinafter referred to as “plaintiffs”). 2. Original plaintiffs had instituted Special Civil Suit No.38 of 2007 in the Court of learned Principal Senior Civil Judge, Navsari, for declaration and permanent injunction to declare that the defendant No.1 Company Meghdoot Dying and Printing Mills Limited (hereinafter referred to as “MDPML”) and its directors had no right, title or interest in the suit property described in Schedule-A to the plaint as the possession of the suit properties had been handed over to them by the defendant No.8 – State Bank of India (hereinafter AO/159/2008 3/38 JUDGMENT referred to as “SBI”). It is also further prayed for an appropriate order directing the SBI to execute the registered document in favour of the plaintiffs with respect to the suit properties known as “MDPML”. In the alternative it is prayed that defendant No.1 and its directors be directed to execute the registered document with respect to the suit properties. The plaintiffs have also prayed for a permanent injunction restraining the defendants from transferring, alienating in any manner whatsoever the suit properties and further permanently restraining the defendants, their agents, servants from obstructing the plaintiffs from using the suit properties, plant and machineries etc., and further restraining them from entering the suit premises. As averred by the plaintiffs in the said suit, the plaintiffs are carrying on the business in the name of M/s.Shiv Land Developers and defendant No.1 is a limited company and defendants Nos.2 to 6 were its Directors and defendant No.7 was carrying on day to day business of the defendant No.1 company. It is also averred in the plaint that the property ad-measuring 950 sq.mtr of Survey No.179 and AO/159/2008 4/38 JUDGMENT ad-measuring 52.25 sq.mtr of Survey No.182 paiki situated in Village Kabilpore, Navsari as well as other properties bearing Survey No.70/2 ad-measuring 1 Acre – 18 Gunthas, Survey No.69/1 + 70/3+4+5 ad-measuring 4 Acre – 21 Gunthas, Survey No.69/2 ad-measuring 2 Acre – 26 Gunthas, Survey No.69/3+4+5 ad-measuring 1 Acre- 12 Gunthas, Survey No.70/1 ad-measuring 15 Gunthas and 14 Gunthas, the total land ad-measuring 43083 sq.mtr., situated at Village Sisodara (Ganesh) and other properties being Plot No.4 at GIDC Navsari ad-measuring 3366 sq.mtr., as well as Plot No.5 ad-measuring 4264 sq.mtr., at GIDC Navsari and the constructed property on the said plots are in their possession and administration as owners. It is the case on behalf of the plaintiffs that the defendant No.1 – Company and its directors had taken financial assistance from defendant No.8 – SBI, and to secure the said loan amount, the properties described in Schedule-A to the plaint and plant and machineries were mortgaged with the SBI. That the defendant No.1 failed to repay the loan amount and therefore the defendant No.8-SBI instituted AO/159/2008 5/38 JUDGMENT Special Civil Suit No.34 of 1985 against the defendant No.1- Company and its directors before the Debts Recovery Tribunal, Ahmedabad, and in the aforesaid suit, the defendant No.1 company handed over the possession of the properties mentioned in Schedule-A to the plaint along with the plant and machineries etc., and the defendant No.8-SBI was in possession of the suit properties. 2.1 It is the case on behalf of the plaintiffs that, during the pendency of the said suit, the plaintiffs wanted to purchase the suit properties along with the plant and machineries etc., and the plaintiff No.5 Shri Nandlal Kalabhai Pandav submitted offer before the SBI, and accordingly the SBI submitted the application in the suit before the Debts Recovery Tribunal to join the said Shri Nandlal Kalabhai Pandav as defendant No.10 in the said suit and the plaintiffs offered to purchase the properties mentioned in Schedule-A to the plaint along with the machineries for a sale consideration of Rs.85.00 lacs and the said offer came to be accepted by the defendant No.1- AO/159/2008 6/38 JUDGMENT company and its directors and the SBI and thereafter consent terms were produced before the Debts Recovery Tribunal, Ahmedabad, on 28.5.1999 which came to be accepted by the Debts Recovery Tribunal, Ahmedabad, and a decree came to be passed in the said suit for an amount of Rs.85.00 lacs and the plaintiffs paid the said amount of Rs.85.00 lacs as full and final settlement of the claim of the SBI against the defendant No.1 company and its Directors and the suit came to be disposed of in terms of the consent terms, and as per the consent terms, the possession of the properties mentioned in Schedule-A to the plaint and the machineries which was with the SBI came to be handed over to the plaintiff No.5 Shri Nandlal Kalabhai Pandav. Thus, as per the plaintiffs, they were handed over the possession of the properties mentioned in Schedule-A to the plaint along with the machineries by the SBI with the knowledge of defendant No.1-company and its directors and with their consent. Thus, it is the case on behalf of the plaintiffs that the plaintiffs have become the absolute owner of the properties mentioned in Schedule-A to the plaint AO/159/2008 7/38 JUDGMENT along with the plant and machineries. It was the case on behalf of the plaintiffs in the suit that in spite of the above the defendant No.1 and its directors with a malafide intention are trying to sale/transfer the properties mentioned in Schedule-A to the plaint along with the machineries dishonestly and with mala fide intention taking disadvantage of the fact that there is no registered document executed in favour of the plaintiffs by the defendant No.1 company and its directors or the SBI and they are trying to disturb the possession of the plaintiffs and therefore the plaintiffs are constrained to file the aforesaid suit with the aforesaid prayers. 2.2 In the said suit, the original plaintiffs submitted application Exh.5 for interim injunction that the defendants be restrained from managing or administering or to mortgage, sale, assign the building known as “MDPML” and machineries on the suit land as well as the lands/properties narrated in Schedule-A attached with the plaint and be restrained from obstructing with the possession and ownership of the plaintiffs. AO/159/2008 8/38 JUDGMENT The trial court at the relevant time issued ex-parte ad-interim injunction against the defendants. The defendants No.1, 3 and 6 appeared through their advocates and filed the written statement/reply against Exh.5 vide Exh.27 and defendant No.8 also filed their written statement vide Exh.49. It appears that and it is the case on behalf of the defendant No.7 who is the main contesting party that they were not served with the summonses of the suit as well as Exh.5 and their summonses were accepted by some other defendants who had no authority to accept the summons/notice on behalf of defendant No.7 and therefore they could not appear before the trial court and could not file the reply. Exh.5 was opposed by the defendants by submitting that by the order passed by the Debts Recovery Tribunal in Special Civil Suit No.34 of 1985, all the properties described and mentioned in Schedule-A attached to the plaint had not been handed over and/or given to the plaintiffs as alleged. 2.3 It was submitted that except the factory premises of AO/159/2008 9/38 JUDGMENT MDPML along with plant and machineries and all the movables situated at National Highway No.8 at Kabilpore, Navsari, no other properties had been transferred and/or sold in favour of the plaintiffs as alleged. It was submitted that rest of the other properties mentioned in Schedule-A to the plaint belong to Meghdoot Knitting Mills (hereinafter referred to as “MKML”). It was further submitted that, even the land on which the factory of MDPML was situated in Survey No.182 part, the same is of the ownership of MKML and was given on lease to MDPML by lease deed dated 26.7.1973. It was further submitted that even in the Special Civil Suit No.34 of 1985 the mortgage property was described `leasehold land' of Survey No.182 ad-measuring 22082 sq.mtr only. Therefore it was specifically denied on behalf of the defendants that by consent decree passed in Special Civil Suit No.34 of 1985, the other properties mentioned in Schedule-A to the plaint belonging to and ownership of MKML had been transferred and the possession of which has been handed over as alleged. It was further submitted that even the plaintiffs have no right, title AO/159/2008 10/38 JUDGMENT and/or locus to institute the suit in question as admittedly except plaintiff No.5 – i.e. Nandlal Pandav, no other plaintiffs were even party to the suit No.34 of 1985 pending before the Debts Recovery Tribunal, Ahmedabad and the payment of Rs.85.00 lacs was made by the said plaintiff No.5 Shri Nandlal Kalabhai Pandav in his individual capacity and not by the partnership firm M/s.Shiv Land Developers, therefore no declaration can be granted in favour of the plaintiffs. It was specifically denied that the plaintiffs are in exclusive possession and owner of the properties mentioned in Schedule-A to the plaint and therefore it was requested to dismiss the application Exh.5. 2.4 After considering the documentary evidence on record and considering the submissions made on behalf of the respective parties, the learned trial court by impugned order dated 25.4.2008 rejected the application Exh.5 and vacated the ad-interim relief granted earlier. AO/159/2008 11/38 JUDGMENT 2.5 Being aggrieved and dissatisfied with the impugned order passed by the trial court passed below Exh.5 dated 25.4.2008 passed in Special Civil Suit No.38 of 2007, the appellants herein-original plaintiffs have preferred the present appeal from order along with civil application for interim relief therein. 3. Shri Mihir Joshi, learned Senior Advocate appearing on behalf of the appellants-original plaintiffs has vehemently submitted that the trial court has materially erred in rejecting the application Exh.5 and not granting the injunction as prayed for. It is submitted that the original plaintiff No.5 on behalf of partnership firm M/s.Shiv Land Developers and its partners had paid Rs.85.00 lacs towards the full and final claim of the SBI against the defendant No.1 – company and its directors and consent terms was submitted before the Debts Recovery Tribunal, Ahmedabad, and a consent decree came to be passed by the Debts Recovery Tribunal, Ahmedabad, in Civil Suit No.34 of 1985 and the SBI handed over the properties of MDPML as described in Schedule `A' to the suit along with AO/159/2008 12/38 JUDGMENT plant and machineries etc. in the year 1999 and since then the plaintiffs are in exclusive possession and owners of the properties narrated/mentioned in Schedule-A to the plaint and therefore the trial court ought to have granted the injunction as prayed for. 3.1 It is further submitted that if the plaintiffs were not to be given and/or transferred all the properties narrated/mentioned in Schedule-A to the plaint, in that case the plaintiffs would not have even accepted the liability of the defendant No.1 MDPML and would not have paid such a huge amount of Rs.85.00 lacs for the factory premises, plant and machineries etc., only. It is submitted that even the compound wall has been constructed by the plaintiffs on the properties mentioned in Schedule-A to the plaint and none of the defendants inclusive of defendant No.7 have objected to the same at any point of time and have never denied the possession of the plaintiffs over the suit properties It is submitted that a systematic fraud has been committed with the AO/159/2008 13/38 JUDGMENT bank by the aforesaid two companies and its directors i.e. MDPML as well as MKML. It is submitted that as such MKML and MDPML are only one entity and both are one and the same and as such MKML is the wholly subsidiary of MDPML and therefore a corporate veil is required to be lifted. It is further submitted that Shri Jethabhai Patel is the director of both the companies. 3.2 Shri Mihir Joshi, learned Senior Advocate has relied upon the decision in the case of Delhi Development Authority vs. Skipper Construction Company (P) Ltd., and another reported in AIR 1996 SC 2005 (para 28) in support of his submission for lifting the corporate veil. Therefore it is requested to lift the corporate veil and hold that the plaintiffs have paid Rs.85.00 lacs in the aforesaid suit with respect to all the properties mentioned in Schedule-A to the plaint and they are also put in possession of the entire properties described and mentioned in Schedule-A to the plaint, and therefore, it is submitted that the trial court has committed a grave error in AO/159/2008 14/38 JUDGMENT dismissing the application Exh.5 and not granting the interim injunction as prayed for. Shri Mihir Joshi, learned Senior Advocate appearing on behalf of the appellants-original plaintiffs has also relied upon Section 13(1)(b) of the Specific Relief Act, 1963. Making the above submission it is requested to allow the present appeal from order and allow the application Exh.5 submitted by the plaintiffs and granting the injunction as prayed for. 4. Appeal from Order is opposed by the respondents herein-original defendants more particularly defendant No.6 and an affidavit-in-reply is also filed by the defendant No.6. Shri S.B.Vakil, learned Senior Advocate has appeared with Ms.Archana Acharya, learned advocate appearing for respondent No.6-original defendant No.6 and Shri A.Y.Kogje, learned advocate has appeared for respondents No.1, 3 and 5 (the defendant No.1 company MDPML and some of its directors). AO/159/2008 15/38 JUDGMENT 4.1 Shri S.B.Vakil, learned Senior Advocate appearing on behalf of respondent No.6 has submitted that all the suit properties belong to MKML inclusive of the land bearing Survey No.182 part which is also of the ownership of MKML, however the same was leased to MDPML and even with respect to land bearing Survey No.182 part the lease has expired in the year 2006. It is submitted that even what was mortgaged with the SBI was the leasehold rights of MDPML in the land bearing of Survey No.182 paiki upon which the factory of MDPML was situated. It is also further submitted that even otherwise as such only Survey No.182 was mortgaged with the SBI along with the factor and the plant and machineries and therefore no other properties mentioned in Schedule-A to the plaint except Survey No.182 could have been and in fact no other property was the subject matter of Special Civil Suit No.34 of 1985 instituted by the bank before the Debts Recovery Tribunal, Ahmedabad, and therefore, even the SBI and/or defendant No.1 company and its directors had in fact not transferred any other properties mentioned in AO/159/2008 16/38 JUDGMENT Schedule-A to the plaint as alleged by the plaintiffs. It is also further submitted that as such and in fact except the possession of the factory premises and plant and machineries of MDPML, the possession of no other properties/lands have been handed over to the plaintiff No.5 in the year 1999 pursuant to the consent decree passed by the Debts Recovery Tribunal, Ahmedabad, in l Civil Suit No.34 of 1985. 4.2 It is further submitted that even with respect to the land bearing Survey No.182, the possession of which was with the MDPML as a lessee, that lease has expired in the year 2006, and even pursuant to the decree passed by the competent civil court i.e. learned Principal Senior Civil Judge, Navsari, even there is no right in favour of MDPML in the said land as a lessee. It is further submitted that even both MDPML and MKML are separate and distinct entities and even it is not the allegation in the plaint that MDPML had diverted and/or siphoned off substantial cash credit granted to it by the SBI. It is submitted that even the submission with respect to the AO/159/2008 17/38 JUDGMENT alleged fraud and/or lifting corporate veil is made for the first time during the course of submissions and neither there are pleadings with respect to the same nor the same have been submitted before the trial court. It is further submitted that even all the plaintiffs have no locus to institute the suit in question and pray for the declaration as sought as all the plaintiffs were not party to the suit before the Debts Recovery Tribunal nor they have paid any amount as alleged. It is submitted that the payment of Rs.85.00 lacs is made by the plaintiff No.5 in his individual capacity and not for and on behalf of partnership firm as alleged. 4.3 It is further submitted that even the partnership firm i.e. M/s.Shiv Land Developers was not even the party to the suit nor the amount of Rs.85.00 lacs is paid by M/s.Shiv Land Developers. Therefore the plaintiffs are not even entitled to institute the suit and/or pray for the declaration and therefore the trial court has rightly vacated the ad-interim injunction and has rightly dismissed the application Exh.5. AO/159/2008 18/38 JUDGMENT 4.4 It is also further submitted that the conduct of the plaintiffs is also required to be considered while considering the application Exh.5. It is submitted that the consent decree passed by the Debts Recovery Tribunal, Ahmedabad, is in the year 1999 and the suit has been filed on 13.11.2007 and no steps are taken by the plaintiff No.5 after 1999 till the filing of the suit. It is further submitted that the suit is filed on 13.11.2007 and the ad-interim injunction was obtained by the plaintiffs on 13.11.2007 and thereafter the plaintiffs have constructed the compound wall and thereafter the application for appointment of Court Commissioner was submitted only on 11.1.2008. Therefore it is submitted that first the appellants got the ad-interim injunction and thereafter constructed the compound wall to make a show that they are in possession of the suit properties and thereafter the application for appointment of Court Commissioner was submitted on 11.1.2008. Thus, the aforesaid conduct of the plaintiffs is also required to be considered. It is further submitted that even the AO/159/2008 19/38 JUDGMENT pleadings with respect to cause of action averred in para 6 and 7 of the suit are self-contradictory. It is submitted that on one hand they are claiming that they are in possession of the disputed properties and the cause of action is pleaded on the allegation of removal of immovable properties which are already removed earlier and in the panchnama no immovable properties have been found. Therefore it is requested to dismiss the present appeal from order. 5. Shri A.Y.Kogje, learned advocate appearing on behalf of respondents No.1, 3 and 5 adopting the submission made by Shri S.B.Vakil, learned Senior Advocate appearing on behalf of defendant No.7 has further submitted that all the properties are of the ownership of MKML, and pursuant to the consent decree passed by the Debts Recovery Tribunal in Special Civil Suit No.34 of 1985 only the factory premises and plant and machineries situated in land bearing Survey No.182 paiki has been transferred and the possession of the same has been handed over to the plaintiff No.5 on payment of Rs.85.00 lacs. AO/159/2008 20/38 JUDGMENT Therefore it is denied that all the properties mentioned in Schedule-A to the plaint were the subject matter of Special Civil Suit No.34 of 1985 which are alleged to have been transferred pursuant to the consent decree passed in Special Civil Suit No.34 of 1985. Therefore it is requested to dismiss the appeal from order. 6. Heard the learned advocates appearing on behalf of the respective parties. 7. At the outset it is required to be noted that all the properties mentioned in Schedule-A to the plaint inclusive of the land bearing Survey No.182 are of the ownership of MKML. It also appears that even the land bearing Survey No.182 paiki upon which the factory of MDPML was situated was occupied by the said MDPML as a lessee, and it appears that the said lease period was upto 26.7.2006 only. It is required to be noted that considering the case pleaded by the plaintiffs in the plaint they have become the owner of all the properties AO/159/2008 21/38 JUDGMENT mentioned in Schedule-A to the plaint inclusive of plant and machineries of MDPML pursuant to the consent decree passed by the Debts Recovery Tribunal, Ahmedabad, dated 28.5.1999 passed in Civil Suit No.34 of 1985 and that they have been handed over the possession of all the properties/lands inclusive of plant and machineries by the SBI on dated 28.5.1999. It is the case on behalf of the plaintiffs that the Civil Suit No.34 of 1985 was filed by the SBI against the defendant No.1 company and its directors and the possession of the mortgaged properties i.e. the properties mentioned in Schedule-A to the plaint was with the SBI, and in the said suit the plaintiff No.5 Shri Nandlal Kalabhai Pandav for and on behalf of partnership firm of M/s.Shiv Land Developers paid Rs.85.00 lacs, and on payment of the aforesaid amount of Rs.85.00 lacs, all the properties mentioned in Schedule-A to the plaint came to be sold/transferred and the decree in favour of SBI came to be satisfied and thereafter SBI had no right, title or interest on the properties, and as stated above in fact the SBI handed over the possession of all the properties mentioned in Schedule-A to AO/159/2008 22/38 JUDGMENT the plaint. Therefore the short question which is required to be considered by this Court is whether pursuant to the consent terms and the consent decree passed by the Debts Recovery Tribunal, Ahmedabad in Civil Suit No.34 of 1985, whether all the properties mentioned/described in Schedule-A to the plaint were sought to be transferred and/or actually transferred and whether the SBI had handed over the possession of all the properties mentioned in Schedule-A to the plaint as alleged by the plaintiffs. For that it is required to be noted that SBI had instituted Civil Suit No.34 of 1985 before the Debts Recovery Tribunal, Ahmedabad for recovery of the loan amount and the amount of finance paid to the defendant No.1 – MDPML and its directors, and as such only the factory premises, plant and machineries situated on land bearing Survey No.182 part with leasehold rights in the said land were mortgaged/hypothecated with the SBI, and on filing the aforesaid suit, the SBI has taken the possession of only factory premises, plant and machineries of MDPML situated on Survey No.182 part only. Even otherwise as such the SBI could not AO/159/2008 23/38 JUDGMENT have taken over the possession of other properties not