Delhi High Court

Subhash Arora vs Kishan Sharma & Ors on 9 January, 2023

Author:
Neena Bansal Krishna

Bench:
Neena Bansal Krishna

2023/DHC/000114

* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Reserve: 23rd September, 2022
Date of Decision: 9th January, 2023

+ CS(OS) 1033/2013

SH. SUBHASH ARORA
S/o Late Sh. J.R. Arora,
C/o C-28, Panchsheel Park,
New Delhi.
..... Plaintiff
Through: Mr. Raman Kapur, Sr. Advocate with
Ms. Damini Chawla & Mr. Manish
Choudhary, Advocates.
versus

1. SH. KISHAN SHARMA
R/o D-38, Panchsheel Enclave,
Panchsheel Marg,
New Delhi 110017.

2. SMT. SANTOSH SHARMA
W/o Sh. Krishan Sharma
R/o D-38, Panchsheel Enclave,
Panchsheel Marg,
New Delhi 110017.

3. DR. NITIN SHARMA
S/o Sh. Krishan Sharma
R/o D-38 Panchsheel Enclave,
Panchsheel Marg,
New Delhi 110017.

4. M/S DIMENSION ARCHITECTURE (P) LIMITED.
Having its office at :

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D-38 Panchsheel Enclave,
Panchsheel Marg,
New Delhi 110017.
..... Defendants
Through: None.

CORAM:
HON'BLE MS. JUSTICE NEENA BANSAL KRISHNA

JUDGEMENT

I.A.7727/2020 (For Impleadment)

1. Kalyani (India) Private Ltd. has filed an application under
Order I
Rule 10 Code of Civil Procedure
, 1908 (hereinafter referred to as "
CPC
")
to be impleaded as a party in the present Suit for Specific performance of an
Agreement to Sell dated 26.03.2012 between the plaintiff and the defendant.

2. The facts in brief as narrated in the application are that the
residential property consisting of Basement, Ground Floor and First Floor
built on Plot No.38, Block-B, Masjid Moth, Panchsheel Enclave, Chirag
Delhi-110017 measuring 216 Sq. Metres (hereinafter referred to as "suit
property"), of which the defendant was the owner, had been mortgaged with
Punjab National Bank by the original owners/ allottees. On account of their
failure to pay the bank dues, the proceedings were initiated by the Bank
under the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
(hereinafter referred to as
"
SARFAESI Act
"). Punjab National Bank, Mayur Vihar, Phase-II, Delhi
held an auction of suit property under the provisions of the SARFESI Act,
2002 on 31st December, 2018. The applicant was declared as the highest
bidder in the auction. The sale in favour of the applicant was confirmed by

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the Bank vide letter dated 01st January, 2019 and the Sale Certificate dated
15th February, 2019 was executed in its favour on 12th June, 2019, and
registered on 14th June, 2019 in the Office of Sub-Registrar, 5-A, Hauz
Khas, New Delhi.

3. The applicant has asserted that the entire sale consideration of Rs.
4,90,25,000/- has already been paid by him to the Punjab National Bank and
the sale transaction has been concluded, despite which the Bank has failed
to hand over the possession of the property for the reasons and causes
attributable to the plaintiff in the present suit.

4. On 20th March, 2020 the applicant became aware of the present Suit
as well as the Order 16th July, 2013. An application was filed before the
learned CMM, Saket Courts, New Delhi and a Receiver was appointed vide
Order dated 20th March, 2016 with the direction to take physical possession
of the suit property.

5.
In the interim, Shri Mayank Sharma who is the family member of the
borrower had filed a suit for Partition bearing CS (OS) 664/2018 titled

Mayank Sharma vs. Santosh Sharma
and obtained interim protection in his
favour on 21st December, 2018 by concealing the true facts before the High
Court of Delhi. The Receiver was unable to take physical possession due to
the interim Order dated 21st December, 2018. The applicant on becoming
aware of the Order dated 21st December, 2018 moved an application under
Order I rule 10
CPC
for impleadment in the said proceedings. Likewise,
Punjab National Bank also filed an application under
Order I Rule 10 of the
CPC
and also an application under
Order XXXIX Rule 4 of the CPC
for
vacating the interim stay. This Court after hearing the parties vacated the

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stay dated 21st December, 2018 and disposed of the respective applications
of the applicant as well as the Bank.

6. Thereafter, fresh directions were obtained by the Bank from the
learned CMM vide Order dated 28th February, 2020 and the respondent
issued a Notice for taking physical possession of the mortgaged property in
question.
In the mean while, plaintiff also filed an application for early
hearing in case titled
SA/NDN/243/2019 Subhash Arora vs. PNB
which is
pending before the DRT-I, New Delhi. After hearing arguments on the
application, the directions were issued by the learned Tribunal to the
plaintiff to make payment but the plaintiff failed to make payment to the
Bank in terms of Order dated 20th March, 2020. It is asserted that the
plaintiff is trying to get the benefit of the interim protection granted by this
Court on 16th July, 2013 and 06th April, 2014. It is apparent that the original
borrower as well as the plaintiff are in collusion with each other and have
filed vague litigations merely to misguide the Court by concealing real facts.

7. It is asserted that the applicant being the directly affected party, whose
presence is not only necessary but also inevitable, may be permitted to be
impleaded as a party to the present proceedings. The application for
impleadment is accordingly filed on behalf of the applicant.

8. The plaintiff in its reply to the application has asserted that the
alleged transaction in favour of Punjab National Bank was entered into
either to defeat the Orders of the Court or to violate it and it confers no right,
title or interest in favour of transferee. This Court vide Order dated 16th July,
2013 which had been finally confirmed on 04th August, 2014 had restrained
the defendants, their legal heirs, agents, assignees from Selling, transferring,
alienating or creating the third party interest in the Suit Property. In utter

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disregard to the said Order, defendants created a mortgage in favour of
Punjab National Bank on 02nd August, 2014. The contempt has therefore,
been committed of the Order dated 16th July, 2013 intentionally and
deliberately. It is asserted that the mortgage and the securitization action
initiated by the Bank qua the suit property is void ab initio and consequent
auction/ sale confers no right, title or interest in the suit property in favour of
the applicant. The plaintiff has claimed that on becoming aware of the
proceedings before the DRT-I and about the securitization proceedings, it
sought a declaration of the entire auction/ proceedings to be declared a
nullity, illegal and void ab initio. The said application is pending
adjudication before the Tribunal.

9. In March, 2020, the plaintiff filed an I.A 539/2020 for restraining the
Bank/ Court Receiver from taking action against the suit property. The
status quo was directed to be maintained by DRT-III in terms of Order dated
20th March, 2020 and restrained further proceedings under
SARFAESI Act

subject to deposit of balance consideration by the plaintiff. This Order was
challenged by the plaintiff before the DRAT and after hearing the matter, it
has been reserved for judgment.

10. It is asserted that the applicant had preferred an application seeking
impleadment before DRAT but the application was dismissed vide Order
dated 19th August, 2020 by holding that since it was not a party before the
DRT, it cannot be permitted to intervene in the Appeal.

11. The plaintiff had preferred an S.A. before DRT in February, 2019
challenging the SARFAESI action despite which the applicant has
approached this Court only now and the applicant, even if for the sake of
arguments is held to be a proper party, it cannot be permitted to join the

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proceedings at this belated stage. For this reliance has been placed on
Vidur
Impex and Traders (P) Ltd. vs. Tosh Apartments (P) Ltd.
(2012) 8 SCC 384.
Moreover, this case is at the stage of defendant's evidence and addition of
any new party at this stage would unnecessarily delay the proceedings.

12. The plaintiff has further claimed that the jurisdiction of this Court to
entertain any proceedings in respect of the matter before the Debt Recovery
Tribunal or Appellate Tribunal is ousted under
Section 34
of the SARFAESI
Act, 2002. This Court has no jurisdiction to entertain the application under
reply of the auction purchaser/applicant. The mortgage and the securitization
action initiated by the Bank in respect of the suit property is void ab initio
and this issue is pending adjudication before the DRT. It is claimed that the
application is therefore, liable to dismissed.

13. The plaintiff has further asserted that it is dominus litus of the suit and
cannot be forced to add parties against whom he does not want to fight
unless it is a compulsion of law. Present is a suit for Specific Performance
of Agreement to Sell entered between the plaintiff and the defendant. The
applicants are not deriving their alleged title from the defendants but are
claiming an independent title. The scope of a suit for specific performance is
limited and it cannot be permitted to be converted into a Title suit.
Moreover, presence of applicant is not required for effective adjudication of
the present suit. It is, therefore, submitted that the present application is
without merit, and is liable to be dismissed.

14. Submissions heard.

15. The plaintiff in the present suit had originally filed a suit for
Permanent and Mandatory injunction in respect of the suit premises.
Subsequently, the plaint was amended to include a suit for Specific

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Performance of the Agreement to Sell dated 26.03.2012. Vide Order dated
16.07.2013, while considering I.A. No. 8884/2013, filed by the plaintiff
under Order XXXIX Rule 1 and 2 read with
Section 151
of the CPC interim
restraint Order was made, relevant part of which is reproduced as under:

"7. Till the next date of hearing, the Defendants,
their legal heirs, agents, assignees are restrained
from Selling, transferring, alienating or creating any
charge or third party interest on the suit property i.e.
the basement, ground floor, first floor and terrace
over third floor of the property at No. D-38,
Panchsheel Enclave, Panchsheel Marg, New Delhi-
l10017 built up on a plot of land admeasuring 265 sq.
yards."

"8. Plaintiff to comply with the provisions of Order
XXXIX Rule 3 within one week from today."

16. It is significant to note that as per the averments made in the plaint
while entering into an Agreement to Sell, the plaintiff had been informed by
the defendant No.1 that their Company, Dimension Architecture Pvt. Ltd
(defendant no. 4) had a dispute with United Bank of India from which it had
availed financial assistance and the defendant nos. 1 to 3 were the
Guarantors and the suit property had been given by them to the Bank as
collateral security towards the financial assistance.

17. The plaint further states that Defendant nos. 1 and 2 had assured that
they would get the property converted to freehold and from the part
payments paid by the plaintiff towards the sale consideration of the suit
property, they would resolve the issues and get the collateral security
released and discharged from the Bank. The plaintiff was thus, well aware at
the time of entering into the Agreement to Sell itself about the charge which
had been created and that the suit property was encumbered.

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18. The defendant had also duly disclosed in its Written Statement that a
cash credit limit of Rs. 500 lakhs was sanctioned in favour of the defendants
by United Bank of India on 18.12.2009 and for the purpose of this credit
facility extended by the Bank, the collateral security was created by way of
equitable mortgage of the suit property in favour of the Bank in addition to
hypothecation of the plant and machinery and the personal guarantee of the
Directors. A sum of Rs. 252 lakhs out of the Cash Credit Facility was paid
by the Bank and it assured the disbursement of balance cash facility of Rs.
248 lakhs as and when required. From the balance amount, the defendants
were allowed to avail and utilize the limit of Rs. 90 lakhs besides Rs. 252
lakhs that was disbursed to it.

19. The Defendants made a payment of Rs. 20 lakhs till March, 2010 to
the Bank. Thereafter, on account of false representations by the Bank to
disburse the balance amount, the defendants undertook a huge project of
approximately Rs. 4.5 crores. However, the Bank unilaterally stopped the
credit facility severely affecting the business prospects of the defendants
who suffered heavy financial losses.

20. The defendants has further disclosed that the Bank issued a Notice
dated 24.06.2010 under
Section 13 (2)
read with
Section 13 (13)
of the
SARFAESI Act, wherein a sum of Rs. 3,43,52,727.00/- was claimed. The
plaintiff while entering into the Agreement to Sell was in the knowledge of
the property being encumbered with the Bank.

21. The present application for impleadment has been filed by the
applicant who is a purchaser of the suit property in an auction purchase
conducted by the Bank with whom the property was encumbered. The short

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issue is whether the applicant can be allowed to be impleaded in the present
proceedings for specific performance of Agreement to Sell.

22. Order I Rule 10 (2)
of the CPC
empowers the Court to strike out the
name of the name of any person improperly joined as plaintiff or defendant
and also to add the name of the plaintiff or defendant who should be joined
or whose presence before the Court may be necessary to enable the Court to
effectually and completely adjudicate upon and settle all the issues involved
in the suit.

23. In Kasturi v. Iyyamperumal and Others (2005) 6 SCC 733, the
Supreme Court observed that the parties necessary in a suit for specific
performance are those who are party to the contract or their legal
representatives in case they are death and a person who had purchased the
contracted property from the vendor. A subsequent purchaser is a necessary
party as he would be affected if he had purchased with or without notice of
the Contract, but a person who claims adversely to the claim of a vendor is
however not a necessary party. For deciding the question who is the proper
party in a suit for specific performance, the guiding principle is that the
presence of such party is necessary to adjudicate the controversies involved
in the suit for specific performance of the Contract for sale. The twin test to
be satisfied for determining the question who is a necessary party are: (1)
There must be a right to some relief against such party in respect of the
controversies involved in the proceedings; and (2) no effective decree can be
passed in the absence of such party.

24. It was further observed in Kasturi(Supra) that
Section 19
Sub-sections

(a) to (e) of the
Specific Relief Act
make it absolutely clear that a person
seeking addition in the suit for specific performance of the Contract for sale

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who are not claiming under the vendor but are claiming adverse to the title
of the vendor do not fall in any of the category enumerated in
Section 19
of
the Specific Relief Act.
Section 19
is exhaustive on the question as to who
are the parties against whom a Contract for specific performance may be
enforced. Thus, the question is to be decided keeping in mind the scope of
the suit. If on the addition of the person, the scope of the suit for specific
performance would be enlarged and would be converted to a suit for title,
presence of such parties cannot be said to be necessary at all.

25. In Kasturi (supra) it was further explained that in a suit for Specific
Performance in respect of contracted party, the Court has to first decide the
lis about enforceability of the Contract entered into between the parties to
the suit and not the question as to who is in possession of the contracted
property. If a third person asserting his independent right and possession in
regard to the contracted property is added in the suit then this process may
continue without a final decision of the suit.

26. In the case of Kasturi (Supra), it was found that the proposed
respondents had not purchased the contracted property from the vendor after
the Contract was entered into. It was observed that the proposed respondents
did not seek their addition in the suit on the strength of the contract in
respect of which the suit for specific performance of the contract for sale had
been filed. Admittedly, they based their claim on the independent title and
possession of the contracted property. In such circumstances, it was held that
the proposed respondents would not be entitled to be impleaded as a party in
such a suit. They were held to be not a necessary party as they would not
affect the Contract entered into between the appellant and the other
respondents.

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27. Sub Rule 2 of
Order I Rule 10 CPC
uses the expression "all the
questions involved in the suit", from which it is abundantly clear that the
legislature intended that the controversies raised between the parties to the
litigation alone must be gone into that is to say the controversies with regard
to the right which is set up and the relief claimed on one side and denied on
the other side and not the controversies which may arise between the parties
to the suit and the third party. This would only lead to complicated
litigations by going into the trial to decide issues which are totally outside
the scope of the suit, the decree of Specific Performance for contact of sale
would not affect the rights of the third parties claiming any independent title.

28. In Amol vs. Rasheed Tuck and Sons Ltd. 1956 (1) All Eng.R 273 it
was held that a person is legally interested in the answers to controversy
only if he can satisfy the Court that it may lead to the result which will affect
him legally.

29. Similar view was taken by the Supreme Court in
Vijay Pratap Vs.
Sambhu Saran Sinha
4 (1996) 10 SCC 53. It may thus be concluded that a
third party or a stranger to a contract cannot be added so as to convert a suit
of one character into a suit for another character. The collateral matters
cannot be included and adjudicated for it would complicate the suit for
specific performance into that to title between the plaintiff and the proposed
respondents.

30.
In
Vidur Impex and Traders Private Limited and Others vs. Tosh
Appartments Private Limited and Others
(2012) 8 SCC 384, in a suit for
specific performance of the Sale Agreement, this Court had granted
injunction restraining respondents no. 2 from alienating the suit property or
creating third party interest and in violation thereof, the defendant executed

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sale Agreements in favour of third party. The third party sought their
impleadment under
Order I Rule 10 of CPC
, their application was rejected
on the ground that the Agreement for sale had been executed by the
defendant in favour of third party in a clandestine manner and in violation of
injunction of the Court and no valid interest or title could have been
transferred to the third party. Further, suppression of material facts took
them out of the category of bona fide purchaser and thus their presence was
held to be neither necessary nor proper for deciding the suit for specific
performance.

31. It was further held that the Court may order impleadment of a
purchaser whose conduct is above board, and who makes an application for
being joined as party within reasonable time of his acquiring knowledge
about the pending litigation. An applicant guilty of contumacious conduct or
is beneficiary of a clandestine transaction or a transaction made in violation
of the restraint order of the Court, is not entitled to be impleaded as a party.

32.
In the case of
Anil Kumar Singh vs. Shivnath Mishra Alias Gadasa
Guru
(1995) 3 SCC 147 it was held that since the applicant was not a party
to the Agreement to Sale, it cannot be said that in his absence the dispute as
to Specific Performance cannot be decided.

In
Vijay Pratap
(supra) the
Apex Court held that to decide the right, title and interest in a suit property
of a stranger to a Contract is beyond the scope of suit for Specific
Performance of the Contract and the same cannot be turned into a regular
title suit

33. From the above mentioned decisions the relevant consideration for
impleadment of a person as a party under
Order I Rule 10 of the CPC
in a

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suit for Specific Performance for Agreement to Sell may be delineated as
under :

(i) Whether in the absence of the applicant, no
decree can be passed;
(ii) Whether the applicant has some right to claim a
relief against either party; and

(iii) Whether it would be necessary in order to enable
the Court to effectively and completely adjudicate
and settle all the questions involving in the suit
even though no relief is claimed against such
applicant.

34. In the present case the applicant is a third party who has purchased the
property in the auction held under the
SARFAESI Act
and his rights are
neither flowing from the Agreement to Sell which is the subject matter of the
present suit nor do they flow from the defendant who was the owner of the
suit property. His rights, if any, have arisen from independent proceedings
which are in no way connected with the present suit. In case the applicant is
allowed to be made a party, the essential nature of the dispute would be
completely displaced as an ancillary controversy in regard to the right of the
applicant, who has purchased the property in an auction purchase, to
continue in possession would ensue. In fact, as explained in the case of
Kasturi (supra) even if a suit for specific performance is decreed, the
plaintiff would necessarily be required to undertake the execution
proceedings if the possession is to be redeemed from the third party. The
rights and the title of the third party can thus, be very well agitated by him in
the execution proceedings, since the decree passed in the suit shall not bind
him.

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35. Likewise, in
Gurmit Singh Bhatia Vs. Kiran Kant Robinson and
Others
(2020) 13 SCC 773, it was observed that merely in order to find out
who is in possession of the contracted property, a third party or a stranger to
the contract cannot be added in a suit for specific performance of the
contract because they are not necessary party as they have no semblance of
life to some relief against the party to the contract. It was further observed
that even if a decree for specific performance was made against the
defendants, the persons who are not parties in the Court would be at liberty
either to obstruct the execution or to protect their possession and take legal
recourse as they were not a party to contract or Agreement to Sell.

36. Furthermore, the plaintiff herein is dominus litis and cannot be forced
to add a party against whom he does not want to file, unless it is compulsion
of law, as held in
Gurmit Singh Bhatia Vs. Kiran Kant Robinson and Others

(2020) 13 SCC 773. It was observed by the Apex Court that the plaintiff is a
dominus litis over his litigation and the subsequent transferee of the suit
property cannot be allowed against wishes of plaintiff who has filed the suit
for specific performance. If the plaintiff despite receiving the notice of claim
of title and possession of other persons who are not party to the suit does not
want them to join in the pending suit, it is always done at the risk of the
plaintiff as he cannot be forced to join a third party as a defendant in the said
suit.

37. Here in the present case, the plaintiff who is claiming a decree for
execution of Sale Deed in his favour, had already applied before DRT where
SARFAESI proceedings are pending wherein he was directed to pay the due
amount in order to forestall the sale of the property. However, the plaintiff
herein has chosen not to protect the property or to pay the sale consideration

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in regard to the subject property as directed by DRT. He being the Dominus
Litus, has also resisted the impleadment of the applicant.

38. The applicant is shown to be neither necessary nor a proper party to
the suit having derived a title through independent auction and not through
vendor and his presence is neither necessary nor proper for effective
adjudication of the present suit. The application under
Order I Rule 10 of the
CPC
is hereby dismissed.

CS(OS) 1033/2013

39. List before the Joint Registrar for recording of Evidence on
15.02.2023.

(NEENA BANSAL KRISHNA)
JUDGE
JANUARY 9, 2023
VA/PA

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