Case: Hanu Motel Pvt. Ltd. and Anr Vs. Uttar pradesh financial Corporation Ltd. and Anr

C.K. Thakker, J. CIVIL APPEAL NOS.6280-6281 OF 2008 @ SPECIAL LEAVE PETITION (CIVIL) NO.10554-55 OF 2003 1. Leave granted. 2. Both these appeals have been instituted by the appellants who are aggrieved and dissatisfied with the order passed by the High Court of Uttranchal at Nainital dated May 06, 2003 in Appeal against Order No. 120 of 2002 and an order dated May 28, 2003 in Civil Review Application No. 2796 of 2003 in Appeal against Order NO. 120 of 2002. 3. Facts in brief of the case are that appellant No. 1 M/s Hanu Motel Pvt. Ltd. is a company registered under the Companies Act, 1956 (‘Company for short) and is engaged in the business of hotel and hospitality and having its Head Office at Lucknow. Appellant No. 2 Avdesh Kumar is a Director of the appellant No. 1-Company. Respondent No. 1, Uttar Pradesh Financial Corporation (‘Corporation for short) is a Corporation constituted under the State Financial Corporations Act, 1956. Respondent No. 2, Ram Raj Singh has been joined as contesting respondent who was the Director of appellant No.1-Company, but who had resigned from the said position subsequently.4. From the record it appears that there was an agreement between appellant No.1-Company and respondent No. 1-Corporation dated May 10, 1991 whereunder loan was given by the Corporation to the Company for the purpose of its business. It was the case of the Corporation that though substantial amount was paid by the Corporation, the Company did not abide by the terms and conditions and the Corporation was constrained to cancel agreement on October 31, 1991. The Corporation also issued demand notice on August 29, 2000. Under the said notice, a demand was made by the Corporation from the appellant No. 1-Company to pay an amount of Rs.185.20 lakhs. The appellant No.1-Company, therefore, filed a suit being Civil Suit No. 111 of 2001 in the Court of Civil Judge (Senior Division), Haridwar on April 28, 2001. It was a suit for declaration that the recovery sought by the Corporation was barred by time since cause of action had arisen in 1991 and proceedings were not initiated for a long time. It was also the case of the Company that cancellation of loan agreement by the Corporation was ex parte, unilateral and hence illegal.5. It may be stated that the suit was filed by two plaintiffs. Plaintiff No. 1 was the Company (appellant No. 1 herein) and plaintiff No. 2 was Ram Raj Singh (respondent No. 2 herein) who is a practising Advocate. It was stated in the plaint that plaintiff No. 1 was a Company and plaintiff No.2 was a Director who was authorized to file a suit on behalf of the Company-plaintiff No.1. On January 19, 2002 an application was filed by the plaintiffs under Order XXXIX, Rules 1 and 2 of the Code of Civil Procedure, 1908 (hereinafter referred to as `the Code) for interim injunction restraining the Corporation from selling hotel or property of plaintiff No. 1-Company. On February 20, 2002, application was allowed and the defendants were restrained from selling the land and building of the plaintiffs.6. Being aggrieved by the order of injunction passed by the trial Court, the Corporation preferred an appeal being Appeal against Order No. 120 of 2002 under Order XLIII Rule 1 of the Code on May 31, 2002. On June 01, 2002, the High Court after hearing the parties directed the Company to deposit an amount of Rs. Fifty lakhs in the Court within 45 days. The matter was ordered to be listed on July 26, 2002. The company filed Miscellaneous Application No. 4347 of 2002 on July 10, 2002 contending that the appeal filed by the Corporation was barred by limitation. The High Court directed the Corporation to file reply.7. On August 02, 2002, according to the appellants, Board of Directors of Company passed a resolution to remove respondent No. 2 - Ram Raj Singh as Director of the Company. By the same resolution, it authorized appellant No. 2 Avdesh Kumar to prosecute the suit and other proceedings.8. Immediately thereafter on August 05, 2002, respondent No. 2 Ram Raj Singh instituted Miscellaneous Application No. 4839 of 2002 in Appeal against Order No. 120 of 2002 in the High Court of Uttranchal to delete his name from the array of parties in the appeal alleging therein that he was not aware of any suit being filed through him and he had not signed the plaint. It was alleged by him that fraud was committed by showing him as plaintiff No. 2 and filing suit for and on behalf of the Company. It was a case of impersonation. He, therefore, prayed for deletion of his name and to take appropriate proceedings for unpardonable fraud committed by the persons responsible.9. On August 09, 2002, an impleadment application was made by appellant No. 2 Avdesh Kumar to be joined as plaintiff in the suit. Likewise, on December 11, 2002, he made a similar application for impleadment in Appeal against Order No. 120 of 2002 being Director of the Company as also guarantor for payment of loan. The application was allowed on December 14, 2002 by the High Court and he was ordered to be impleaded.10. The High Court then heard the Appeal against Order and by the impugned order dated May 06, 2003 disposed of the appeal after hearing the learned counsel for the Corporation and the learned counsel for Ram Raj Singh. It observed that according to Ram Raj Singh, he had not signed the plaint and yet he was shown as plaintiff No.2. Thus, the suit was filed by resorting to impersonation. The Court, therefore, held that since Ram Raj Singh did not sign the plaint, he could not be said to be plaintiff No. 2. As such the plaint could not be said to be signed by an Authorized Officer and suit by plaintiff No. 1-Company also did not survive and was liable to be dismissed. The High Court held that the appeal was liable to be dismissed. Even the suit had become infructuous. According to the High Court, no such suit could have been instituted.11. The High Court also observed that fraud had been played to abuse the process of law. Central Bureau of Investigation (CBI) was, therefore, ordered to register a case against the Company and its Directors and to investigate the matter as to who had played fraud and to prosecute the persons as found guilty in investigation.12. It was the case of the Company that no hearing was afforded either to the Company or to Avdesh Kumar who was already impleaded in the appeal. The order of the High Court was in violation of principles of natural justice and fair play. Review application was, therefore, filed by the appellants herein. The High Court, however, dismissed the Review Application by the second impugned order dated May 28, 2003 inter alia observing that when the Court held that no suit could have been instituted by the Company-plaintiff No. 1 in view of the case of the plaintiff No. 2 Ram Raj Singh that he had not signed the plaint and was never plaintiff No. 2. There was thus no suit in the eye of law and the appeal also did not survive. According to the Court, therefore, no order of impleadment of Avdesh Kumar could have been passed on December 14, 2002. Hence, that order was also set aside by the High Court dismissing review petition.13. Both the above orders of the High Court of Uttaranchal have been challenged by the appellant in the present appeals. 14. Notice was issued pursuant to which the parties appeared. Affidavits and further affidavits were also filed. 15. We have heard the learned counsel for the parties. 16. The learned counsel for the appellants strenuously contended that the orders passed by the High Court are totally illegal, unlawful and violative of basic principles of natural justice. It was submitted that order dated May 06, 2003 was passed without hearing the affected parties, i.e. appellant No. 1-Company and appellant No. 2 Avdesh Kumar whose impleadment application was allowed as early as in December, 2002. Though the impugned order was passed after about five months of impleadment of appellant No.2, no hearing was afforded to any of the appellants. It was also submitted that the High Court was wholly wrong in recalling the order of impleadment of Avdesh Kumar passed in December, 2002. It was submitted that when the Appeal against Order was heard and decided on May 06, 2003, Avdesh Kumar was very much a party-respondent and yet the High Court did not think it fit to give an opportunity of hearing to him and decided the appeal which had caused serious prejudice to the appellants. It was strenuously urged that certain observations were made by the High Court only on the basis of ipse dixit allegations of Ram Raj Singh that fraud was committed against him and he had not signed the plaint. The counsel submitted that CBI has investigated the matter and has submitted the report wherein it was expressly observed that Ram Raj Singh had signed the plaint and had filed a suit. It was, therefore, submitted that the orders passed by the High Court deserve to be set aside by remitting the matter for fresh disposal in accordance with law. 17. The learned counsel for respondent No. 2 Ram Raj Singh stated that the High Court had passed the order and there is no infirmity therein. 18. The learned counsel for the Corporation submitted that substantial amount is due and payable by the Company and in the fight between two groups, the Corporation is deprived of its legitimate dues. 19. Having heard the learned counsel for the parties, in our opinion, the orders passed by the High Court cannot be sustained. It is clear that the suit was filed by two plaintiffs as early as in April, 2001. Plaintiff No. 1 was the Company and plaintiff No. 2 - Ram Raj Singh was shown to be a Director. An application under Order XXXIX of the Code was filed wherein interim relief was granted. Appeal against Order was filed by the Corporation and only in August, 2002, a Miscellaneous Application was filed by Ram Raj Singh to delete his name alleging that he had not singed the plaint and he was fraudulently described and shown as plaintiff No. 2 in the suit. It is unfortunate that the High Court decided the matter without hearing the present appellants, i.e. appellant No. 1-Company and appellant No. 2-Avdesh Kumar whose impleadment application was allowed on December 14, 2002 by the High Court and the High Court was, therefore, aware that he was very much on record. The learned counsel for the appellants is also right in contending that the High Court virtually decided the matter on the basis of one sided version of Ram Raj Singh who had alleged that fraud was committed against him. This is clear from what is stated by the High Court. 20. The High Court while disposing of the appeal inter alia observed; "The plaintiff No.2 in the suit is practicing advocate of the Lucknow Courts and is present in the Court. He made statement at Bar that he did not file any suit. The suit was filed by resorting to impersonation. He did not make signatures on the plaint and the affidavit. The plaintiff No.1 has not been arrayed through any of its Directors. The plaintiff No.2 has also not been mentioned in the array of parties to be the Director of the Company. In view of the statement made by Sri Ram Raj that he ha snot filed the suit in question and he is not prosecuting the suit, the suit is liable to be dismissed on behalf of plaintiff No.2 and the suit also cannot proceed on behalf of plaintiff No.1, as the Company ha snot been arrayed as party through any Director. Therefore, the suit is liable to be dismissed. Consequently the impugned order has merged in the order of dismissal of suit, which has rendered the appeal as infructuous. The appeal is dismissed accordingly as having become infructuous". 21. Granting liberty to Ram Raj Singh to take legal recourse against those persons who had played fraud upon him, the Court proceeded to state; "However, Shri Ram Raj, advocate is at liberty to take legal recourse against those persons who have played fraud upon him. Sri Ram Raj, advocate and learned counsel for the appellant have submitted that a fraud has been played to abuse the process of law, therefore, this Court may order the CBI to register a case against company and its Directors and investigate as to who has played fraud. Having regard to the seriousness of the fraud played, we direct the S.P., CBI to investigate the matter personally and prosecute the person who is found guilty in investigation. Record of the Civil Suit No.111 of 2001 shall be kept in sealed cover and shall be handed over during the course of investigation to S.P., CBI". 22. The counsel submitted that had an opportunity been afforded to the appellants, they could have shown that it was not correct that Ram Raj Singh had not signed the plaint or fraud had been committed by the Company or any officer of the Company. According to the learned counsel, on the contrary, CBI made the inquiry and submitted the report wherein it was specifically observed that Ram Raj Singh was not right when he asserted that he had not singed the plaint and that fraud was committed. According to CBI, it was Ram Raj Singh who had filed the suit, was shown as plaintiff No. 2 and it was his signature in the proceedings. 23. In our opinion, the learned counsel for the appellants is also right in contending that when present appellant No. 2 Avdesh Kumar was impleaded in December, 2002 as party and was very much on record in Appeal against Order, opportunity ought to have been afforded to him as to whether the Appeal from Order had become infructuous and whether the suit would not survive. To us, it appears that the High Court followed an easy path unknown to law when it rejected Review Petition on May 28, 2003 by recalling the order passed on December 11, 2002 virtually rectifying the order passed on May 6, 2003. In our considered opinion, the High Court ought to have extended an opportunity of hearing before passing order dated May 6, 2003 as also dated May 28, 2003 to appellant No.1-Company as well as to appellant No.2-Avdesh Kumar. 24. As to the report of CBI and prima facie case found against Ram Raj Singh in the investigation undertaken, it would not be appropriate to state anything one way or the other. Since we are of the view that both the orders passed by the High Court are liable to be set aside only on the ground of non-observance of natural justice, the matter should be remanded to the High Court for fresh disposal in accordance with law. Observations made by this Court may adversely affect one or the other party and it is not appropriate to express any such opinion. We are, however, convinced that both the orders dated May 06, 2003 and May 28, 2003 passed by the High Court are liable to be set aside. 25. In the result, both the appeals are allowed. Orders dated May 06, 2003 and May 28, 2003 are hereby set aside. The matters are remanded to the High Court for fresh decision in accordance with law after giving opportunity of hearing to all the parties.26.

Decision reasoning: 1[ds]. In our opinion, the learned counsel for the appellants is also right in contending that when present appellant No. 2 Avdesh Kumar was impleaded in December, 2002 as party and was very much on record in Appeal against Order, opportunity ought to have been afforded to him as to whether the Appeal from Order had become infructuous and whether the suit would not survive. To us, it appears that the High Court followed an easy path unknown to law when it rejected Review Petition on May 28, 2003 by recalling the order passed on December 11, 2002 virtually rectifying the order passed on May 6, 2003. In our considered opinion, the High Court ought to have extended an opportunity of hearing before passing order dated May 6, 2003 as also dated May 28, 2003 to appellant No.1-Company as well as to appellant No.2-Avdeshto the report of CBI and prima facie case found against Ram Raj Singh in the investigation undertaken, it would not be appropriate to state anything one way or the other. Since we are of the view that both the orders passed by the High Court are liable to be set aside only on the ground of non-observance of natural justice, the matter should be remanded to the High Court for fresh disposal in accordance with law. Observations made by this Court may adversely affect one or the other party and it is not appropriate to express any such opinion. We are, however, convinced that both the orders dated May 06, 2003 and May 28, 2003 passed by the High Court are liable to be setthe result, both the appeals are allowed. Orders dated May 06, 2003 and May 28, 2003 are hereby set aside. The matters are remanded to the High Court for fresh decision in accordance with law after giving opportunity of hearing to all the parties.