IN THE HIGH COURT AT CALCUTTA Ordinary Original Civil Jurisdiction ORIGINAL SIDE BEFORE: THE HON’BLE JUSTICE SOUMEN SEN G.A.No.1919 of 2017 G.A.No.1705 of 2017 G.A.2282 of 2017 C.S.No.113 of 2017 SESA INTERNATIONAL LIMITED versus AVANI PROJECTS & INFRASTRUCTURE LIMITED & ORS.AND RELIANCE COMMERCIAL FINANCE LTD.For the Petitioner/Plaintiff : Mr.Anindya Kumar Mitra, Sr.Adv., Mr.Ajay Krishna Chatterjee, Sr.Adv., Mr.Abhrajit Mitra, Sr.Adv., Mr.V.N.Dwivedi, Adv., Mr.Argha Jena, Adv., Ms.Jayanti Char, Adv.For the Defendant No.2 : Mr.Mr.Mr.Mr.For the Respondents : Mr.Jishnu Saha, Sr.Adv., Mr.Anirban Kr.
Ray, Adv.For Reliance Commercial Finance : Mr.Tilak Kr.
Bose, Sr.Adv., Mr.Ravi Kapur, Adv., Mr.A.Kanodia, Adv.Hearing Concluded On : 17.08.2017 Judgment On : 5th September, 2017 Soumen Sen, J:- S.K.Kapoor, Sr.Adv., Ranjan Bachawat, Sr.Adv., Vikas Tewary, Adv.Sanket Saraogi, Adv.The three applications filed by the plaintiff, the defendant No.2 and Reliance Commercial Finance LTD.are disposed of by this common judgment.
The petitioner claims to be an allottee of 21,000 sq.ft.
of super builtup area in service apartment in project ‘Avani Grand’ located at 8, JBS Haldane Avenue, Kolkata- 700 105 (hereinafter referred to as “said property”).It is alleged that the respondent has agreed to allot the same at a price of Rs.10,000/- per sq.ft.
aggregating to Rs.21 crores.
It was represented on behalf of the respondent that the construction work would commence within August, 2014 and would be completed by December, 2016.
Pursuant to the agreement, the petitioner paid Rs.21 crores by RTGS through its banker.
Since the construction work did not commence, the respondent no.2 proposed to refund the said sum of Rs.21 crores with interest at the rate of 18% per annum till the date of repayment as also preestimated damages of Rs.8 crores by way of compensation upon the petitioner agreeing to terminate the said allotment.
It is claimed that the parties have mutually agreed to settle their disputes and the respondents have made payment of five instalments through RTGS aggregating to Rs.4.25 crores out of Rs.8 lakh payable towards compensation and/or preestimated damages leaving balance amount of Rs.3.75 crores.
The petitioner has disclosed the particulars of the cheques aggregating to Rs.35,88,34,387/- payable on account of refund of the consideration amount along with pre-estimated damages and compensation.
The said cheques were dishonoured on presentation and returned to the plaintiff with the endorsement “insufficient funds”.
The twenty-three several cheques aggregating to a sum of Rs.35,88,34,387/- were issued by the respondent no.1 after deducting the amount of tax deducted at sources (TDS).The said respondent also did not submit the certificate of tax deduction at sources in spite of requests.
The amount of TDS deducted by the respondent no.1 comes to Rs.1,23,70,489/-.
The plaintiff has filed the suit for recovery of the said amount.
In the said suit, the plaintiff has filed an application being G.A.No.1705 of 2017 seeking reliefs in the nature of attachment before judgment.
On 17th May, 2017 a Special Officer was appointed to file a status report with regard to the progress of work at the said premises.
The respondents were restrained from creating any further encumbrance in respect of the property till the returnable date.
A rule was also issued against the defendants requiring them to show cause as to why the respondents should not be called upon to furnish security.
The matter was made returnable on 14th June, 2017.
On 14th June, 2017, the respondent did not file any affidavit in answer to the show cause.
The respondents, however, prayed for two weeks time to file an affidavit to disclose the present financial status of the respondents and the manner in which the respondents proposed to secure the claim of the plaintiff.
The said order also records that the respondent No.1 may not have any defence to the claim of Rs.21 Crores and the respondents have expressed their inability to presently pay the aforesaid sum.
It was, however, submitted that the respondents have already created a mortgage in favour of the Reliance Commercial Finance LTD.as a security for loan of a sum of Rs.270 crores was disbursed in connection with the said project.
Another company belonging to the Reliance Group has also disbursed a sum of Rs.50 crores for development of the self-same project and both the lenders have a pari passu charge over the securities created in respect of the property in question prior to the order dated 17th May, 2017.
On the same date, that is, 14th June, 2017, Reliance Commercial Finance LTD.made an oral intervention.
Mr.Tilak Kumar Bose, the learned Senior Counsel representing the said Company submitted that any order concerning the property in question is likely to affect the rights of the said lendeRs.On consideration of the submissions made on behalf of the parties, the earlier order was clarified to the extent that if already a charge has been created in favour of the Reliance, the right of Reliance to enforce the mortgage would remain unaffected by the order dated 17th May, 2017.
Leave was given to Reliance to make an application for variation of the order dated 17th May, 2017.
This order has triggered two applications.
The fiRs.application is by Reliance Commercial Finance LTD.being G.A.No.1919 of 2017 in which Reliance has prayed for vacating the interim order in relation to the said property.
The second application has been filed by the defendant No.2, praying, inter alia, for separate representation and for variation of the order dated 17th May, 2017 as it is submitted that the Vakalatnama filed by Mr.Sanket Saraogi, Advocate on behalf of the defendant No.2 was without any authority.
In effect, the defendant No.2 attempts to disassociate it from the defendant No.1 as certain concessions were made earlier on behalf of the defendants with regard to their inability to pay presently a sum of Rs.21 crores.
The basis of the application of Reliance appears to be that Reliance is a mortgagee and the plaintiff has snatched an order over and in respect of the entirety of the property of the defendant No.2 without disclosing the prior mortgage and that the plaintiff has a claim only against the defendant No.1.
There is no privity of contract between the plaintiff and the defendant No.2.
The applicant has disclosed documents showing creation of equitable mortgage in respect of the premises No.8, JBS Halden Avenue, Kolkata – 700 105.
It appears that the said mortgage was created on 26th September, 2012.
Thereafter, a registered deed of mortgage dated 10th October, 2012 was executed.
The defendants are all parties to the said deed.
The defendant No.2 is the owner of the property.
The entire shareholding of the defendant No.2 is pledged with the applicant.
The applicant is the only secured creditor in respect of the defendant No.2.
The defendants have also executed facility agreement for governing the rights of the defendants in respect of the said loans as also the said property.
In the application, it is stated that initially a mortgage was created by deposit of title deed on 26th September, 2012.
Thereafter, a registered deed of mortgage dated 10th October, 2012 was executed.
The defendants are all parties to the said deed.
The applicant has relied upon Clause 3.1 and 5.4 of the said deed which reads:- “3.1.
In consideration of the Facility Agreement and the grant of the Mortgage Debt by the Mortgagee to the Mortgagor and in consideration of the convents given by the Mortgagor and the Holding Company to the Mortgagee, under the Facility Agreement and under these presents to secure the repayment on the Due Date and in accordance with this Deed the Mortgage Debt and in consideration of the covenants given by the Mortgagor to the Mortgagee under these presents the mortgagor hereby grants, conveys, assure, transfers and assigns unto the Mortgagee the Mortgaged Property (without possession).5.4.
The Terms conditions convents and other representations made by the Parties under the Facility Agreement shall be applicable to this Deed and shall from part of this Deed and continue to remain binding and in full force and effect.” The terms of the Facility Agreement are also incorporated by reference into the said deed of mortgage.
The petitioner has also disclosed the Facility Agreement dated 10th October, 2012 and the subsequent Facility Agreement dated 30th June, 2015.
It is stated that pursuant to the aforesaid charge was created with the Registrar of Companies on 10th October, 2012 in respect of both the defendant Nos.1 and 2.
The applicant has disclosed a copy of such charge registered with the Registrar of Companies in favour of the applicant in respect of the defendant Nos.1 and 2 including the suit property.
Subsequent charge documents filed with the Registrar of Companies in respect of the defendant Nos.1 and 2 in 2015 are also disclosed.
The applicant claims to have lent and advanced various sums of money to the defendants for the project named “Avani Grand” to be developed and constructed at the said property aggregating to Rs.278 crores since September, 2012.
A further sum of Rs.50 crores has been sanctioned by Reliance Home Finance Limited (a subsidiary of Reliance Capital Limited) and out of the said amount Rs.33.34 crores have already been disbursed.
It is stated that as of June 13, 2017, only interest has been paid to the applicant company till 31st May, 2015 and, thereafter, a moratorium was declared for payment of principal and interest till 1st September, 2017.
The applicant further contends that from time to time part payments towards interest had been made due credit for which has been given by the applicant.
The applicant has stated that by the Facility Agreement dated 30th June, 2015, the defendants have been granted a moratorium which is due to expire in September, 2017.
The defendant Nos.1 and 3 are misusing the moratorium granted by the applicant.
The defendant No.2 in its application has contended that the plaintiff is only having a money claim against the defendant No.1.
The plaintiff has not claimed any right, title or interest in the property.
It, however, seeks to secure its money claim.
It is submitted that DLF Hilton Hotels Limited renamed as Adone Hotels & Hospitality LTD.was granted a lease on 10th August, 2007 by K.M.C.in respect of said property for 99 yeaRs.In June, 2012 a term sheet was executed between the defendant no.1 and defendant no.2 for development of land earmarked for residential tower.
In September, 2012 Reliance Capital Limited (RCL) sanctioned a loan for Rs.250 crores to be utilized for funding the acquisition and for carrying out development and construction of residential tower, hotel and Bungalow/Guest House out of which Rs.50 crores was disbursed.
In consideration of the said loan in September, 2012 an equitable mortgage was created by the defendant no.2 by deposit of Title Deeds.
Subsequently, on 10th October, 2012 a registered deed of mortgage, facility agreement and several other documents in favour of Reliance Capital Limited relating to project finance of Rs.250 crores was executed.
The creation of charge over the said securities with the Registrar of Companies was created both by the defendant no.1 and defendant no.2.
In terms of the Facility Agreement the loan was secured, inter alia, by an exclusive charge over the property and all constructions and development rights connected thereto and on all receivables and rights, interests, claiMs.benefits etc.of the project.
In addition the entire shareholding of the defendant no.2 was pledged in favour of Reliance Capital Limited.
The Facility Agreement also prevents any borrowing by the defendants without written consent of Reliance Capital Limited.
Mr.S.K.Kapoor, the learned Senior Counsel representing one defendant No.2 has referred to Clause 12 of the Schedule 10 of the agreement which specifically prohibited the defendants from selling any portion without “No Objection Certificate” from Reliance Capital Limited.
On 9th November, 2013 a formal development agreement was executed between the defendant no.1 and defendant no.2.
Mr.Kapoor submits that in view of the aforesaid facts alleged oral agreement between Shankar Lal Bagri and defendant no.3 allegedly representing defendant no.1 and defendant no.2 for allotment of 21,000 sq.ft.
at Rs.10,000 per sq.
for Rs.21 crores with representation that work would commence in August 2014 and be completed by December, 2016 is completely unbelievable and the plaintiff has spun a story and has filed this proceeding in collusion with the defendant No.3.
It is submitted that the plaint does not identify the allotted property inasmuch as no written permission or NOC obtained from Reliance Capital Limited before entering into such alleged agreement.
Mr.Kapoor submits that money could not have been paid to any account save and except the escrow account and Reliance Capital Limited had a charge on all receivables.
The letter dated 15th November 2014 is fabricated inasmuch as the defendant no.3 had no authority to make any such representation as it is contrary to the terms embodied in registered deed of mortgage and charge filed with the ROC and the facility agreement as well as the development agreement.
Mr.Kapoor contends that the said document is a sham document.
The plaintiff did not produce any written agreement.
The said alleged letter dated 15th November, 2014 is the only document where there is a reference to defendant no.2 otherwise all payments etc.were between plaintiff and defendant no.1 only.
It is intrinsically unbelievable that debtor would voluntarily write such letter without even a letter of demand.
The same is also contrary to all project finance documents which prohibits both the defendant no.1 and defendant no.2 from any such deal on any basis.
The said letter does not even speak of the location of 21000 sq.
Mr.Kapoor submits that from March, 2014 to August 2014 plaintiff in driblets allegedly made on account payment of Rs.21 crores for this alleged allotment to defendant no.1 allegedly pursuant to the oral agreement.
However there is no evidence to show that payments were actually made.
Such unspecified payment made though it was notoriously evident that no work of construction was going on or even contemplated.
Mandatory deduction on TDS of Rs.21 crores as per Section 194 IA effective from 1st June, 2013 read with Section 2(47) of the Income Tax Act has been admittedly ignored.
Mr.Kapoor submits that between December, 2014 and March, 2015, the defendant No.1 made alleged repayments in driblets of Rs.4.25 crores to the plaintiff.
However, no receipts were disclosed in this proceeding.
The plaintiff has purported to adjust the same against its alleged claim for damages in the fiRs.instance.
Since there was need of fund on 30th June, 2015, RCFL (earlier RCL) enhanced the loan to Rs.278 crores for which additional mortgage was created.
The defendants have also executed project finance documents and both the defendants have filed creation of charge document with the Registrar of Companies.
The earlier registered mortgage, however, The Reliance Housing Finance LTD.also sanctioned a sum of Rs.50 crores for the project out of which 37.5 crores was disbursed.
In consideration of availing of such credit facilities pari passu charge was also created and necessary creation of charge documents were filed by the defendant No.1 and the defendant No.2 with the Registrar of Companies.
In terms of such agreement, from time to time, three directors of RFCL were appointed on the Board of the defendant No.2.
It is strange that the defendant No.3 without any letter of demand signed six alleged letters on the letter head of the defendant No.1 confirming alleged liability and forwarding cheques.
The letters apparently show that the plaintiff and the defendant No.1 were treating the transaction to be of four loans of Rs.5 crores, Rs.5 crores, Rs.5 crores and Rs.6 crores.
By the 5th letter, the defendant No.3 allegedly confirmed interest on damages.
Mr.Kapoor wonders as to what really necessitated the defendant No.3 to write such six letters after a lapse of 23 months.
The 23 cheques all dated 16th February, 2017, for an aggregate sum of Rs.35,88,34,387/- was issued by the defendant No.1 in favour of the plaintiff on 16th February, 2017 under the cover of a letter dated 8th February, 2017.
Mr.Kapoor submits that the defendant No.2 has nothing to do with those cheques as no money was received by the defendant No.2 from the plaintiff.
On the basis of the aforesaid, Mr.Kapoor submits that the claim in the plaint is intrinsically unbelievable with inherent contradictions.
There is no documentary evidence to connect the defendant No.2 to the alleged transaction except the letter dated 15th November, 2014 which is created as an afterthought and is palpably a suspect document.
In any event, the said letter could not have been signed by the defendant No.3 or anyone else on behalf of the defendant No.2 in view of the stipulations in the facility agreement and the pledge of shares of the defendant No.2 in favour of the RCFL.
Accordingly, it is submitted that the plaintiff’s rights to relief, if any, can only be against the defendant No.1.
Mr.Kapoor submits that it is a collusive proceeding filed to get the property and defeat other bona fide creditORS.It is submitted that the plaintiff has suppressed the other suit as well as the dealings with RCL, that is the registered mortgage and charge registered with the Registrar of Companies, etc., in relation to the property in question.
The entire debt of RCFL and RHFL is reflected in the balance sheet and documents of the defendant No.1.
It is submitted that the submissions made on the basis of the property being a partnership asset or its stock in trade cannot be maintained at this stage as there is no foundational pleading either in the plaint or in the petition and the entire argument is detours record and in any event unmeritorious.
Mr.Kapoor refers to a Division Bench judgment of our Court in Dharendra Krishna Deb and Ors.v.Surendra Krishna Nandi and Ors reported at AIR1930Cal 610 for the proposition that a simple contract creditor who has no specified charge or no right to be paid out of a specified fund cannot in general ask for the appointment of a Receiver.
In Owen v.
Homan relied upon in Dharendra (supra) the Lord Chancellor observed: “The plaintiffs here do not claim as specific appointees of any part of the Defendants’ separate estate.
They are merely in the nature of general creditors seeking to obtain payment by a sort of equitable action of assumpsit or debt.
In such a case it is a strong exercise of authority to deprive the Defendant, on motion of property on which the plaintiffs have no specific claim in order that if they establish their claim as creditors there may be assets where with to satisfy them.” Mr.Kapoor has also relied upon the other observation of the Division Bench following Lord Chancellor’s observation which reads:- “It has been also said that “the slowness or inadequacy of the legal remedies open to general creditors who have no lien on the Defendants’ property are not consideration that move a Court of equity, in the absence of statutory authority, to intervene in their behalf with the instrumentality of a Receiver to preserve the debtors’ property”.
There is thus a preponderance of authority so far as decisions of English and American Courts are concerned in support of the view that in the absence of statutory provisions to the contrary a general contract creditor before judgment is not entitled to a Receiver against his debtor upon whose property he has acquired no lien.
1 C.P.C.also the same view appears to have been taken, and it was only when an appointment was validly made on the ground that the property was the subject matter of the suit that it was allowed by the Appellate Court to continue as a means of realising the amount decreed against the judgment debtor personally.
[Ramasami N v.
Ramasam Chetty]..” In the same vein the decision of the Bombay High Court in Harkisondas Nanjibhal v.
Chaturbhuj Prabhudas and ORS.reported at AIR1947Bom 434 has been relied upon that the claim of the plaintiff is on account of damages and the present action is an action in tort moreover the rights of other creditors if there are any have always got to be considered on applications of this kind.
Mr.Kapoor submits that apart from the fact that there is no privity of the contract between the plaintiff and the defendant no.2 any order concerning and attaching the said property would transpose the plaintiff from the unenviable position he now occupies of not being even a creditor of the defendant no.2 into the much more fortunate one of a secured creditor.
Any order of attachment or receiver or injunction at this stage would have an extraordinary effect of converting the plaintiff in an action as against the defendant no.2 for damages into a secured creditor.
Mr.Kapoor refers to a judgment of the Hon’ble Supreme Court in Raman Tech & Process Engg.
Co.v.Solanki Traders reported at (2008) 2 SCC302for the proposition that merely having a just or valid claim or a prima facie case will not entitle the plaintiff to an order of attachment before judgment, unless he also establishes that the defendant is attempting to remove or dispose of his assets with the intention of defeating the decree that may be passed.
Mr.Kapoor submits that in the Raman Tech (supra) the Hon’ble Supreme Court has gone further in stating that even where the defendant is removing or disposing his assets, an attachment before judgment will not be issued, if the plaintiff is not able to satisfy that he has a prima facie case.
It is submitted that the plaintiff cannot have any cause of action against the defendant no.2 and accordingly no order can be passed concerning the said property on which the defendant no.2 is the owner.
Mr.Kapoor refers to a Division Bench judgment of the Madhya Pradesh High Court (Gwalior Bench) in Madhu Lal v.
Ramji Das Chironji Lal and ORS.reported at AIR1953MP85for the proposition that appointment of a receiver on the ground that it is “just and convenient” must pass test that “it is practicable and the interest of justice required it” to appoint receiver over the suit property.
Mr.Kapoor refers to the paragraph 6 of the said judgment which refers to and relied upon the Division Bench judgment in Dharendra Krishna (supra) and the paragraph from Woodroffe’s Law of ReceiveRs.The said paragraph reads: “the great weight of authority supports the rule that in the absence of statutory provisions to the contrary a general contract creditor before judgment is not entitled to an injunction or a receiver against his debtor upon whose property he has acquired no lien”.
Mr.Kapoor concludes by submitting that the plaintiff has not acquired any lien on the property of the defendant no.2 cannot seek any order of attachment or injunction or receiver over and in respect of the said property inasmuch as any such order would prevent the defendant no.2 from discharging its existing obligation under several agreements factor with the Reliance group in relation to the said property.
The application for intervention is resisted by the plaintiff on the ground that there is no attachment over and in respect of the property in question.
Mr.Anindya Kumar Mitra, the learned Senior Counsel on behalf of the plaintiff submits that what has been attached is only the equity of redemption of the mortgagor.
When the right to redeem is only attached, the mortgagee cannot come and raise objection to the order of attachment.
An alleged mortgagee has no right to intervene and property even if mortgaged can be attached and sold.
Attachment or sale of mortgage properly means sale of right of redemption of the mortgagor.
It has been clarified by judgments in Parashram Harlal v.
Govind Ganesh Porgaumkar reported at (1897) ILR21BOM226and 1983(4) SCC570 It is submitted that in view of settled position of law, RCFL even if a genuine mortgagee has no right to intervene.
The subsisting order adequately protects the interest of the applicant inasmuch as the applicant cannot object to such order of attachment.
The other objection appears to be that the applicant cannot run a case inconsistent with the right of the plaintiff in this application and cannot claim addition of parties.
The applicant, in fact, has not prayed for addition of parties.
An intervener cannot raise points which are not canvassed by the petitioner in the pleadings and in this regard a decision of the Hon’ble Supreme Court in M/S.Gammon India LTD.& Ors.v.Union of India & ORS.reported at (1974) 1 SCC596Paragraph 39 and a Division Bench judgment of the Punjab and Haryana High Court in Dr.
Sudha Suri v.
Union of India & ORS.reported at 2003 SCC OnLine P&H1656 (2003) 1 SLR679(DB) Paragraphs 18, 23 and 24 have been relied upon.
It is submitted that the documents disclosed by the applicant would show that the applicant is colluding with the defendants in order to frustrate the right of the plaintiff.
In responding to the argument of the defendant No.2, Mr.Mitra submits that it is too late in the day for the defendant no.2 to contend that the defendant no.3 had no authority to write the said letter dated 15th November, 2014.
The said defendants are same although made to look On April 11, 2005 the defendant no.1 was promoted by the defendant no.3 and his family membeRs.The defendant no.2 which already was the lessee in respect of premises no.8 JBS Haldane Avenue, Kolkata 700 105 was acquired by the defendant no.3 through the defendant no.1 on June 11, 2012.
Admittedly the defendant no.2 is a wholly owned subsidiary of the defendant no.1.
They are to be treated as single entity.
The defendant no.1 and 2 have common directORS.one of whom is the defendant no.3.
The Constitution of the Board of Directors of the defendant no.2 would show that during the period of transaction the defendant no.3 was a director and he had executed various important documents including the agreement on behalf of the defendant no.1 and 2.
Between March, 2014 and August 2014 the plaintiff had paid through its bankers Real Time Gross Settlement (RTGS) a total amount of Rs.21 crores for booking of service apartments at the rate of Rs.10,000 per sq.
in the service apartment building to be constructed under the project known as “Avani Grand” undertaken jointly by the defendant no.1 and 2.
Under the joint development agreement all amounts on account of booking charges were to be deposited in the account of the defendant no.1.
The same would also be evident from the model sub-lease agreement disclosed by defendant no.2.
The defendant no.3 asked the plaintiff to cancel the booking as the price of immovable properties had started soaring in that area.
A tripartite agreement between the plaintiff, the defendant nos.1 and 2 was entered into and recorded in the letter dated 15th November, 2014.
This has been signed on behalf of the defendant nos.1 and 2 by the defendant no.3.
Under the tripartite agreement dated 15.11.2014 the defendant Nos.1 and 2 agreed to return Rs.21 crores with interest at the rate of Rs.18% per annum and pre estimated damages/compensation.
The defendants acted upon the said agreement and made part payments of Rs.4.25 crores by RTGS between 22nd December, 2014 and 18th March, 2015.
Other post dated cheques for an aggregate amount of Rs.25,88,34,387/- were all dishonoured subsequently on the ground of “Funds insufficient”.
The claim of the intervener RCFL is on the ground that the land in question was mortgaged in its favour to secure an alleged loan.
RCFL relied on registered Deed of Mortgage dated 10th October, 2012.
The facility agreement dated 10.10.2012 as disclosed by RCFL would permit the defendant no.2 to borrow up to the limit of Rs.250 crores.
The defendant no.1 is the fiRs.obligator and the defendant no.3 is the third obligor to this facility agreement.
The defendant no.3 has signed the facility agreement on behalf of both the defendant nos.1 and 2.
In the form CHG-1 submitted by the defendant no.2 with the Registrar of Companies, it has been declared that loan amount is modified from Rs.250 crores to Rs.92,37,100/-.
The defendant no.2 is their application has annexed the company master data showing that the said charge for the amount of Rs.250 crores created on 28th September, 2012 was closed and the amount of charge has been modified to Rs.92,37,100/- on 30th June, 2015 which became payable under new facility agreement.
The case of RCFL has been that an equitable mortgage on the leasehold property was created by the defendant no.2 on 30th June, 2015.
This mortgage is wholly disputed by the plaintiff.
The initial mortgage dated 10.10.2012 was a registered one to secure a loan upto Rs.250 crores.
The said mortgage was closed and is therefore, non-existence.
By reason of closure of the registered mortgage, the information as to such mortgage was withdrawn from the public domain so as to avoid access thereto by the creditors of the defendants.
Subsequently on 30.06.2015 equitable mortgage was allegedly created by deposit of title deed of No.8 JBS Haldane Avenue Kolkata 700105.
Although the registered mortgage dated 10.10.2012 was registered with Registrar of Companies but the alleged equitable mortgage by deposit of tile deed is not so registered.
Non- registration of the subsequent equitable mortgage with ROC raises doubts as to its creation and indicates avoidance of putting the factum of alleged mortgage beyond the public domain as also beyond the reach of creditors of the defendants.
Significantly the registered mortgage deed does not record “Memo of Consideration” which is invariably mentioned at the foot of every mortgage recording payment of loan secured by the mortgage.
In place of registered mortgage, on 30.06.2015 an equitable mortgage by deposit of title deed came to have been made as above.
There is no proof evidencing deposit of title deed of the property by the defendant no.2 in favour of RCFL nor there is any document disclosed by RCFL in its Intervention application evidencing acknowledgement of deposit of title deed from the defendant no.2.
The mode and manner of disbursement and receipt of loan have also not been disclosed.
The entire exercise is clearly suspicious.
There is no document disclosed by the mortgagee evidencing disbursement of alleged loan amount allegedly secured by the purported mortgage, similarly, no document has been disclosed by the defendant no.2 acknowledging receipt of the alleged loan from RCFL.
Undisputedly the requisites of an equitable mortgage by deposit of title deeds are (a) a debt (b) a Deposit of title deeds and (c) An intention that deeds shall be security for the debt.
In the instant case all these requisites are missing and not available from documents disclosed either by the defendants or by the Intervener (RCFL).The factum disbursement is highly disputed.
of grant of loan and consequent The plaintiff denies that any loan was provided to defendant companies.
RCFL and defendants could not disclose documents.
Mr.Mitra accordingly submits that the case of loan and security by mortgage should be rejected.
Mr.Mitra has severely criticized the stand taken by the defendant No.2 in this proceeding.
It is submitted that there is no merit in the application of defendant no.2.
Mr.Mitra submits that there is no requirement for No Objection Certificate (NOC) from RCFL for entering into any Agreement for sale as such agreement does not create any charge or interest in the property.
Model sub-lease agreement in favour of the buyer as disclosed does not mention of any permission of RCFL.
Under the Mortgage Deed as disclosed by RCFL, prior NOC will be required only if a charge or encumbrance or mortgage is created over the alleged mortgaged property.
Agreement for sale does not create any interest, charge or hypothecation or encumbrance or mortgage on the property being the subject matter of an agreement.
There is no requirement for non-deduction of 1% TDS form the amount paid for booking charge.
This contention can be raised only when there was an agreement for sale for space in service apartment at the rate of Rs.10,000 per sq.
between plaintiff and defendant Nos.1 and 2.
Under the Income Tax Act, 1961, 1% deduction is required only in case of sale/transfer of property and in case of amount paid for transfer of the immovable property.
The word “transfer” has been defined under Section 2(47) of the Income Tax Act, 1961.
Transfer includes sale, exchange etc.This application in the name of the defendant no.2 has really been engineered by the defendant No.3 with the prayer for “expunging all concessions and admissions, if any, purporting to have been made on behalf of the applicant in the present proceeding” and order dated May 17, 2017 and all consequential and/or subsequent orders be stayed.
There is really no concession or admission made on behalf of the defendant no.2 in the order dated May 17, 2017.
The said application in the name of the defendant no.2 has been affirmed and verified by one Nimesh Parikh.
Mr.Nimesh Parikh joined the Board of defendant no.2 on 05.06.2015, whereas the transaction with the plaintiff relates to the period prior to that.
Mr.Parikh has no competence to verify and affirm the affidavits.
He has no personal knowledge of the suit transaction.
Mr.Parikh attended only one out of nine board meeting of defendant o.2 held between 01.04.2015 and 31.03.2016.
Mr.Parikh did not attend even AGM of defendant no.2 held on 30.09.2016.
Mr.Parikh is neither a director of defendant no.1 nor a shareholder of defendant no.2.
There is a Joint Development Agreement dated 09.11.2013 between Defendant nos.1 and 2.
The said agreement is in the nature of a partnership and would continue to be so till partnership continues.
The property thus cannot be withdrawn and treated to be property of Defendant no.2 alone during the currency of the agreement.
The above joint Development Agreement is treated in law as “Partnership” and sections 8, 14 and 15 of the Partnership Act, 1932 are applicable.
Consequently the Leasehold property is liable for debts of the partnership.
Mr.Mitra refers to Clauses 10A, 11, 12 and 13 of the Joint Development Agreement (in short “JDA”) to submit that the said clauses amongst others have recognized that the defendant No.1 and the defendant No.2 shall be in joint possession and the piece and parcel of the land at the said premises was to be treated as a stock-in-trade and not a capital asset.
It also mentions about revenue sharing and permits Avani to enter into the agreements for sub-lease and/or transfer of various apartments and car parking spaces forming part of the development agreement in the name of Avani and Adone had agreed to sign and execute all such agreements.
The said agreement recognized that Avani is availing a project finance facility from Reliance Finance Capital LTD.and Adone has agreed to join as a coapplicant or as corporate guarantor for obtaining or availing such loan or financial assistance.
Mr.Mitra has referred to a decision of the Hon’ble Supreme Court in Addanki Narayanappa & Anr.
versus Bhaskara Krishtappa & 13 ORS.reported at AIR1966SC1300and a single Bench decision of this Court in Albert Judah Judah versus Rampada Gupta & Anr.
reported at AIR1959Cal 715 submits that the Courts have consistently held that whatever may be the character of the property which is brought in by the partners when the partnership is formed or which may be acquired in this case is a Joint Development Agreement it becomes the property of the firm and what a partner is entitled to is his share of profits, if any, accruing, to the partnership from the realization of the said property, and upon dissolution of the partnership to a share in the money representing the value of the property.
Since the firm has no legal existence, the partnership property will vest in all the partners and in that sense every partner has an interest in the property of the partnership.
Mr.Mitra has specifically drawn attention of this Court to Paragraph 7 of the said report in which it is stated:- “7.
The whole concept of partnership is to embark upon a joint venture and for that purpose to bring in as capital money or even property including immovable property.
Once that is done whatever is brought in would cease to be the trading asset of the person who brought it in.
It would be the trading asset of the partnership in which all the partners would have interest in proportion to their share in the joint venture of the business of partnership.
The person who brought it in would, therefore, not be able to claim or exercise any exclusive right over any property which he has brought in, much less over any other partnership property.
He would not be able to exercise his right even to the extent of his share in the business of the partnership.
As already stated, his right during the subsistence of the partnership is to get his share of profits from time to time as may be agreed upon among the partners and after the dissolution of the partnership or with his retirement from partnership of the value of his share in the net partnership assets as on the date of dissolution or retirement after a deduction of liabilities and prior charges.” Mr.Mitra submits that the defendant No.3 is the director of the defendant No.2 is in dispute.
Mr.Mitra submits that although in Clause 21.1 it records that the JDA does not create nor shall it in any circumstances be taken as having created a partnership between the parties and the rights and obligations of the parties shall be governed by the terms and conditions of the JDA but it has been judicially recognized that the Court in such circumstances may look to the substance of the agreement and not what the parties say or contend.
The substance shall always take precedence over the form and in this regard Mr.Mitra has relied upon two passages from Lindley & Banks on Partnership, 17th Edition Paragraph 5-05 and 18-36 which read:- “5-05 In Weiner v.
Harris .1 K.B.285 Cozens-Hardy M.R.was more forceful: “Two parties enter into a transaction and say ‘It is hereby declared there is no partnership between us.’ The Court pays no regard to that.
The Court looks at the transaction and says ‘Is this, in point of law, really a partnership?.’ It is not in the least conclusive that the parties have used a term or language intended to indicate that the transaction is not that which in law it is.” 18-36 It should, perhaps, be noted in this context that, once a partner has brought an asset into the firm by way of capital contribution, it will become partnership property and he will cease to enjoy any beneficial interest therein which is qualitatively different to that of his co-partners.” It is submitted that once under the JDA, the said loan was treated as a stock in trade none of the parties can resile from it and the said property is required to be attached more so when the fraudulent intent of the judgment-debtors are evident.
Mr.Mitra has also relied upon a decision in Board of Revenue & ORS.versus A.M.Ansari & ORS.reported at (1976) 3 SCC512for the proposition that it is essential to look to the substance and essence of the agreement and not to its form.
Mr.Mitra submits that the JDA has always been recognized as akin to partnership and in this regard reliance has been placed on an unreported judgment of this Court dated 11th December, 2001 passed by Hon’ble Justice Ashok Kumar Ganguly in Akla Builders PVT.LTD.versus Cityscape Developers PVT.Ltd., A.P.No.237 of 1998.
Mr.Mitra has relied upon the following passages from the said decision in support of his submission:- “Partnership has been defined under Section 4 of the Indian Partnership Act as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
From the joint venture agreement dated 07.08.1992 clauses of which have been referred to above, it is clear that the said agreement demonstrates the relationship between the persons who have agreed to share the profits of a business.
If the definition of the partnership as given under Section 4 of the Indian Partnership Act is analysed, it will be clear that it has three components: a) Agreement must be entered into by all persons; b) Agreement must be to share the profits of a business; c) The business must be carried on by all or any one of the persons acting for all.
It may be that those components/elements may over-lap.
But that does not convert the relationship between the parties as anything other than the relationship between the partneRs.The question is whether a single venture agreement can be a partnership.
Section 8 of the Indian Partnership Act deals with such a situation.
Section 8 makes it clear that a person may become a partner with any person in particular adventure or undertaking.
Therefore, the term business, which has been used in Section 4 of the said Indian Partnership Act, may consist of even a single commercial adventure on which the parties may embark.
Such instances of a particular partnership may take various forms including the development of a parcel of land.
(See the judgment of the Division Bench of the Andhra Pradesh High Court in the case of Pangoti Manga Rao versus Chinndi Kishan Rao, reported at 1965 Andhra Pradesh
98) On this king of partnership, Lindley on Partnership (15th Edition Page
124) has stated “if persons, who are not partners in other business share the profits and loss, or the profits, of one particular transaction or adventure, they become partners as to that transaction or adventure, but not as to anything else”.
Mr.Mitra submits that the said agreement clearly establishes an association of two persons to carry out a single business enterprise, namely, development of the said land for profit and the relationship between the parties are of partneRs.Mr.Mitra invites this Court to apply the aforesaid principle in the instant case and to hold that the principles of the partnership law will be applicable to the JDA in this case.
It is submitted that in view of the stand taken by the defendant No.2 at this stage that the defendant No.2 is not bound by the agreement arrived at between the plaintiff and the defendant Nos.1 and 3 as contained in the letter dated 15th November, 2014, it is necessary to pierce the veil of the defendant No.2 to find out who is in actual control and management of the defendant No.1.
Mr.Mitra submitted that it is necessary in view of the stand taken by the defendant No.2 now that the defendant No.3 had no authority to sign the said letter on behalf of the defendant No.2 although, admittedly at the relevant time, had signed and/or executed various documents on behalf of the defendant No.2.
Mr.Mitra has referred to the constitution of the Board of the defendant No.2 for the period of transaction with the plaintiff and submits that at the relevant time, the defendant No.3 was one of the directors of the defendant No.2.
In fact, the defendant No.2 became the Managing Director of the defendant No.3 on and from 1st December, 2015.
Mr.Mitra has referred to few documents, namely, the letter dated 26th September, 2012 issued by Reliance for sanction for loan and its acceptance, Facility Agreement dated 10th October, 2012 between Reliance Capital LTD.and defendants, Form 8 filed with the ROC on 10th October, 2012, Agreement for sub-lease dated 27th February, 2014 between defendants and V.V.PVT.Ltd., Form 20B filed with the ROC dated 5th September, 2014, letter issued to the plaintiff by the defendants on 15th November, 2014 where the defendant No.3 became the Managing Director of defendant No.2 from 1st December, 2014, Facility Agreement between Reliance Capital LTD.and defendants on 30th June, 2015, Form No.MGT-7 filed with the ROC on 29th August, 2015, Form No.MGT-7 filed with the ROC on 20th September, 2016 to illustrate that the defendant No.2 was represented by the defendant No.3.
It is submitted that under such circumstances, the separate representation made by the defendant No.2 has to be viewed with suspicion and it is now necessary to leave the corporate veil.
Mr.Mitra submits that it is an admitted position that the defendant No.2 is wholly owned subsidiary of the defendant No.1 and by reason thereof it has to be treated as a single entity.
Mr.Mitra refers to the decision of the Court of Appeal in D.H.N.Food Distributors LTD.versus Tower Hamlets London Borough Council reported at (1976) 1 WLR852: (1976) 3 All ER462and the decision of the Hon’ble Supreme Court in New Horizons Limited & Anr.
versus Union of India & ORS.reported at (1995) 1 SCC478in support of the aforesaid submission.
It is submitted that the Court having due regard to the fact can see through the corporate veil to ascertain true nature of the defendant.
Mr.Mitra invites this Court to apply the said principle to pierce the veil as this couRs.is required to be adopted as the corporate personality is flagrantly opposed to justice and the notion of the legal entity of the defendant No.2 is used to justify wrong and protect fraud.
Mr.Mtra referred to Paragraphs 30, 31, 34, 38 and 40 of New Horizons LTD.(supra) to submit that the argument made by the defendant No.2 is too technical an argument and borrowed the expression of Lord Reid as quoted in Paragraph 30 of the said report which reads:- “30...“This is an argument in re mercatoria, and it must be construed in the light of the fact and realities of the situation.” Mr.Mitra has referred to Paragraph 31 of the said report where D.H.N.Food Distributors LTD.(supra) was considered.
The said Paragraph 31 reads:“31.
In DHN Food Distributors Ltd.v.London Borough of Tower Hamlets, (1976) 3 All ER462 (1976) 1 WLR852 the Court of Appeal was dealing with three companies, out of which one was the holding company and the other two were its subsidiaries.
After quoting the views of Prof.
Gower that “there is evidence of a general tendency to ignore the separate legal entities of various companies within a group, and to look instead at the economic entity of the whole group” Lord Denning, M.R.has observed: “This group is virtually the same as a partnership in which all the three companies are partneRs.They should not be treated separately so as to be defeated on a technical point.” In the same case, Goff, L.J.has said: “[T].his is a case in which one is entitled to look at the realities of the situation and to pierce the corporate veil.” The observations of Shaw, L.J.were to the following effect: “Whey then should this relationship be ignored in a situation in which to do so does not prevent abuse but would on the contrary result in what appears to be a denial of justice?.” In this case the holding company was held entitled to compensation for disturbance from premises in its occupation on account of compulsory purchase of the property which belonged to one of the subsidiaries and in which the holding company had no interest.
This was a case in which the court lifted the corporate veil so as to confer a benefit on the company.” The Facility Agreement dated 10th October, 2012 describes Defendant no.2 as Borrower and defendant Nos.1 and 2 as obligators amongst otheRs.Significantly, from clause 4.1 of the Facility agreement, it would appear that the loan amount will be disbursed in 4 tranches and disbursement per tranche Nos.1, 2 and 3 respectively for Rs.50 crores, Rs.55 crores and Rs.95 crores were provided for repayment of the borrower’s inter corporate deposits.
Accordingly the contention of the defendant no.2 that it was sanctioned project finance is false.
Defendant no.1 was sanctioned project finance.
The Facility Agreement dated 10th October, 2012 provides in Clause 2.1, 2.2 and 2.3 that the loan shall be solely applied for the purpose of paying the development costs and construction costs of the Kolkata project described at Schedule 3 and for no other purpose.
Evidently utilisation of disbursement of loan provided in tranches 1 to 3 under clause 4.1 is clearly contrary to and beyond the purpose as enumerated in clause Nos.2.1, 2.2 and 2.3.
The defendants are unable to produce any document to show compliance of clause 4.2 and 27.2 of the Facility Agreement.
The contention of RCFL that Rs.278 crores and Rs.33.34 crores were allegedly disbursed for the development and construction purpose of the Avani Grand Project is untrue as the state of activity of the defendants in the suit property as revealed from Special Officer’s Report hardly supports that the purported loan was utilised for development and construction of the project.
The plaintiff’s case that the defendants had siphoned out and utilised the loan for payment of their debts to third party is thus, proved and beyond doubt.
It is evident from the balance sheet of defendant no.2 for the years 2014-15 and 2015-16 that there was no “Long Term Borrowings” by the defendant no.2.
The case of loan is thus further falsified.
The Special Officer’s Report confirms that the project has been abandoned, so booking fees received in advance from several prospective flat owners were not utilised for construction but have been siphoned which is evident by “Standalone Financial Statement”.
The loss of defendant no.1 as per said statement was Rs.28,50,26,456/- and legal cases for recovery of Rs.3,02,47,808/- against defendants are pending.
The plaintiff’s case for attachment before judgment is, thus, established.
Mr.Mitra while responding the argument made on behalf of the defendant No.2 that a receiver should not be allowed in a money suit has referred to a Division Bench judgment of our Court in Lalchand Chhaganmull versus Bengal Warehouse and Construction PVT.LTD.reported at 1994 (1) CLT337Paragraph 24 and a Division Bench judgment of the Kerala High Court in Arun Agencies, Mattancherry versus St.
Antony’s Oil Mill & ORS.reported at AIR1989Kerala 312 Paragraph 4.
It is submitted that in the said decisions it has been categorically held that the Court has jurisdiction to appoint a receiver even a simple money suit before decree only in extraordinary cases.
It is submitted that in the instant case, the plaintiff has been able to make out an extraordinary case for attachment and notwithstanding the doubtfulness of the mortgage created by the defendant No.2 in favour of Reliance, the plaintiff is at least entitled to attachment of the equity of redemption of the defendant No.2.
Before considering the contentions it is necessary to understand relative scope of attachment, injunction and receiver.
The Code of Civil Procedure has three different chapters dealing with Attachment, Injunction and Receiver namely, Order 38, Order 39 and Order 40.
Order 38 has two parts.
Order 38 Rules 1 to 4 deal with arrest before judgment and Order 38 Rules 5 to 13 deal with attachment before judgment.
In the instant application the Court is concerned with attachment before judgment.
The main object of an attachment before judgment is to enable the plaintiff to realise the decreetal sum if one is eventually passed, from the defendant’s property.
The object is to prevent a decree likely to be passed from becoming illusory or infructuous.
In other words, an order of attachment before judgment prevents an untruly attempt by the defendant to defeat fruits of the decree passed in favour of the plaintiff.
The essential requirements which must be proved to the satisfaction of the Court for seeking a relief for attachment are:- (i) The defendant is about to dispose of the whole or any part of his property; or (ii) The defendant is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court; (iii) that the defendant is intending to do so to cause obstruction or delay in the execution of any decree that may be passed against him.
Vague and general allegations that the defendant is about to dispose of the property or remove it beyond the jurisdiction of the Court, unsupported by particulaRs.would not be sufficient compliance with the rule; (iv) It is incumbent upon the plaintiff to state the grounds on which he entertains the belief or apprehension that the defendant would dispose of or remove the property, or to give the source of his information and belief in the matter through an affidavit.
An attachment before judgment is not a process to be adopted as a matter of course.
The suit is yet to be tried and the defence of the defendant is yet to be tested.
At the nebulous juncture, the relief which is extraordinary could be granted only if the conditions for its grant, as per the provisions of the Code of Civil Procedure, stand satisfied.
This process is never meant as a lever for the plaintiff to coerce the defendant to come to terMs.Hence utmost caution and circumspection should guide the Court.
There has to be some prima facie material on the basis of which the court could satisfy that the conditions requisite for making an order of attachment before judgment exist.
Otherwise every plaintiff would rush in which a bald averment and obtain an order from court.
The circumstances that a company is in financial strain or that the debtor may be unable to pay the debt do not warrant attachment before judgment.
In Sardar Govindrao Mahadik v.
Devi Sahal reported at (1982) 1 SCC237 AIR1982SC989 the Supreme Court stated that the sole object behind the order levying attachment before judgment is to give an assurance to the plaintiff that his decree if made would be satisfied.
It is a sort of guarantee against decree becoming infructuous for want of property available from which the plaintiff can satisfy the decree.
Thiru Venkita Reddiar reported at (1996) 3 SCC189 AIR1996SC1293 the Court stated that an attachment before judgment does not create any right, title or interest in favour of the plaintiff seeking such attachment.
It merely disables the defendant to create any encumbrance on the said property.
It is only when a decree is passed that the property forms part of the decree so as to enable the decree-holder to proceed against the property attached to realise decretal dues.
In Rajendran v.
Shankar Sundaram reported at (2008) 2 SCC724 AIR2008SC1170 the Court discussed the ambit and scope of Order 38, Rule 5 and stated that while exercising jurisdiction thereunder, the Court is required to form a prima facie opinion at that stage.
It need not go into correctness or otherwise of all contentions raised by the parties.
If prima facie case has been made out by the plaintiff and the defendant is asked to furnish security, it cannot be said that he is seriously prejudiced.
In Raman Tech & Process Engg.
Co.v.Solanki Traders reported at (2008) 2 SCC302 the Supreme Court highlighted the object of Order 38 Rule 5 as preventing the defendant from defeating realisation of decree that may ultimately be passed in favour of the plaintiff, either by attempting to dispose of, or remove his property from the jurisdiction of the Court.
But it was observed that before exercising such power, the Court must be satisfied that there is a reasonable chance of a decree being passed in the suit against the defendant.
The plaintiff must also show that the defendant is attempting to remove or dispose of his assets with the intention of defeating the decree.
A defendant is not debarred from dealing with his property merely because a suit is filed or about to be filed against him.
The Court rightly stated: “The power under Order 38 Rule 5 CPC is a drastic and extraordinary power.
Such power should not be exercised mechanically or merely or the asking.
It should be used sparingly and strictly in accordance with the Rule.
The purpose of Order 38 Rule 5 is not to convert an unsecured debt into a secured debt.
Any attempt by a plaintiff to utilise the provisions of Order 38 Rule 5 as a leverage for coercing the defendant to settle the suit claim should be discouraged.
Instances are not wanting where bloated and doubtful claims are realised by unscrupulous plaintiffs by obtaining orders of attachment before judgment and forcing the defendants for out of court settlements under threat of attachment.” In a locus classicus in Premraj Mundra v.
Manech Gazi reported at AIR1951Cal 156: 87 Cal LJ41 the High Court of Calcutta after considering several decisions on the point, deduced certain principles which have been consistently followed by all courts including the Supreme Court.
The plaintiff is also required to establish that the defendant is attempting to remove or dispose of his assets with an intention to defeat the decree that may be passed against him.
The order of attachment however, cannot affect any right of any third party which existed much prior to the date of attachment order.
Any order passed under Order 38 Rule 5 does not confer any title nor any priorities in favour of the plaintiff.
It is clear from Order 38 Rule 10 of the Code of Civil Procedure.
Order 39 deals with temporary injunction and interlocutory ordeRs.Temporary or perpetual injunction is in the nature of preventive relief granted to a litigant quia timet, i.e, because he fears future possible injury.
An injunction is a judicial proceeding operating in personam where-under a party is required to do, or refrain from doing, any particular act.
It is a remedy in the form of an order of the Court addressed to a particular person that either prohibits him from doing or continuing to do a particular act (prohibitory injunction).or orders him to carry out a certain act(mandatory injunction).(See.
Food Corporation of India v.
Sukh Deo Prasad, (2009) 5 SCC665 AIR2009SC2330.
According to Wade & Forsyth: Administrative Law (2009).injunction is the standard remedy of private law for forbidding the commission of some unlawful act, e.g.a tort or breach of contract.
Its sanction is imprisonment or fine for contempt of court, or attachment of property.
Historically, it is an equitable remedy, since it derives from the former courts of Chancery, and accordingly it has a discretionary character.
Now, even in England, it is statutory.
In India, it is statutory in nature.
The need for such protection, however, has to be judged against the corresponding need of the defendant to be protected against injury resulting from exercising his own legal rights.
The court must weigh one need against another and determine where the balance of convenience lies and may pass an appropriate order in exercise of its discretionary power.
Colgate Palmolive (India) Ltd.v.Hindustan Lever LTD.(1999) 7 SCC1 AIR1999SC3105.
In the leading case of Polini v.
Gray reported at (1879) 12 Ch D438 41 LT143 the principle behind grant of interim relief has been explained succinctly by Cotton, L.J.thus: “It appears to me on principle that the court ought to possess that jurisdiction, because the principle which underlies all orders for the preservation of property pending litigation is this, that the successful party is to reap the fruits of that litigation, and not obtain merely a barren success.” While Order 39 Rule 1(a) and 1(c) refer to the property in dispute, Order 39 Rule 1(b) does not put any such restriction as it uses the phrase “to remove or dispose of his property with a view to divert his creditor.” The property contemplated under Order 39 Rule 1(b) may not be the property in dispute in the suit.
An injunction can also be granted by the court to restrain a threatened removal or disposal of property with a view to defrauding creditORS.If the court is satisfied that the defendant intends to remove or dispose of his property and his intention in doing so is to defraud his creditORS.injunction under Rule 1(b) can be granted (Padam Sen v.
State of U.P.AIR1961SC218.
Such property may be movable or immovable.
Unlike clause (a) the applicability of clause (b) is not restricted or limited to the “property in dispute in a suit.” Hence, clause (b) can be invoked even if the property is wholly outside the subject matter of the suit.
(Albert Judah Judah v.
Rampada Gupta, AIR1959Cal 715).Only thing is that threat or intention to remove or dispose of property to defraud creditors must be supported by sufficient particulaRs.(Anand Prasad Agarwalla v.
Tarkerhwar Prasad, (2001) 5 SCC568.
there is a distinction between the attachment and According to dictionary meaning, “attachment” means “act of attaching”, “state of being attached”.
In law, it is seizure of property or person by legal authority, especially seizure of defendant’s property to prevent its dissipation before trial.
[Oxford Webster’s Encyclopedic Unabridged Dictionary, (1994).p.
95; Justice C.K.Thakker: Encyclopaedic Law Lexicon, (2009)].The word “attachment” has been defined as: “taking into custody of law a person or property of one already before the Court, or of one whom it is sought to bring before it; a writ issued at the institution or during the progress of an action, commanding the sheriff or other proper officer to attach the property, rights, credits or effects of the defendant to satisfy the demands of the plaintiff.” (Justice C.K.Thakker, P.R.Aiyar, ibid).The said distinction was discussed by the Division Bench of this Court in case of Boeing Company versus R.M.Investment & Trading Co.PVT.LTD.reported at (1994) 99 CWN1 1994 (2) Cal L.T.300 in paragraphs 13 and 14 of the said report which read:“13.
Attachment – The word “attachment” in statute authorizing an attachment of property omitted from assessment meant a specific attachment, Commercial Credit Co.v.Martin, 122 S.W.2d.
135, 136 275 Ky.”
548. The purpose of “attachment”, generally, is to take defendant’s property into legal custody, so that it may be applied when defendant’s debt to plaintiff was established.
John Decre Flow Co.of St.
27 S.E.2d 571, 572, 203 SC426 “Attachment’ is in nature of a preliminary execution against property to afford satisfaction of plaintiff’s claim, and attachment laws are legal modes of acquiring title to property by operation of law, Chinnis v.
Cobb, 185 SE638 642, 210 NC104 “14.
In fact, Injunction is different from Attachment.
The Code of Civil Procedure has provided two different provisions for the same.
An attachment is a proceeding to collect and enforce a lien.
It is a remedy for the collection of an ordinary debt.
Whereas Injunction restrains the disposition of property, it is not an attachment of property.
Injunction does not constitute a lien on the property.
It could be granted only when equity, justice and good conscience of the party needs it.” There is distinction between the provisions of Order 38, Rule 5 and Order 39, Rule 1(b) in that the former is intended to prevent a decree that may be passed being rendered infructuous while the latter is invoked where the defendant threatens to dispose of his property with a view to defraud creditORS.In an unreported decision of the Division Bench decision of our Court in Santosh Promoters PVT.LTD.& ORS.Versus Intrasoft Technologies Ltd., F.M.A.2600 of 2016 with CAN3088of 2016 and CAN7807of 2016 dated December 9, 2016 the relative scope of both the sections were discussed.
It is stated:- “Let us now try to find out the distinction between the provisions under order 39 Rule 1(b) of Civil Procedure code and the provision contained in Order 38 Rule 5 of the Code of Civil Procedure.
At the very outset, we like to mention here that that those two provisions operate in different fields altogether.
Order 38 Rule 5 of the Civil Procedure Code contemplates post decree consequences.
While dealing with such an application, the Court is required to find out fiRs.as to whether there is strong possibility of passing a money decree in favour of the plaintiff.
If the court is satisfied that there is every possibility of passing a money decree in favour of the plaintiff, then only the court can pass any order of attachment before judgment provided the Court is satisfied that the defendant is either trying to dispose of whole or any of his property or is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court, with an intent to obstruct or delay the execution of any decree that may be passed against him.
Reading the said provision as a whole, we are of the view, that order of attachment before judgment cannot be passed by any Court unless the Court is satisfied about the conditions as mentioned above.
Simultaneously if we consider the provisions contained in Order 39 Rule 1(b).of the Civil Procedure Code we find that while passing an order of injunction, the Court is not required to find out as to whether there is every possibility of passing a decree in favour of the plaintiff in the suit.
While considering the application for temporary injunction, the Court is only required to ascertain as to whether a prima facie case has been made out by the plaintiff in the suit.
Prima facie case means an arguable case meaning thereby that a reasonable dispute is raised before the Court which the Court is required to resolve ultimately in the suit.
A prima facie case is distinguishable from a full-proof case.
When the Court finds that a prima facie case is made out by the plaintiff then the Court passes an order of injunction so that the ultimate relief which is claimed by the plaintiff in this suit is not frustrated and the decree which may be passed in the suit will remain unexecutable.
Apart from making out a prima facie, the plaintiff is also required to prove that if the balance of convenience and inconvenience is weighed, that will be in favour of grant of injunction, and if injunction is not granted, the plaintiff will suffer irreparable loss and injury.
Again the order of attachment before judgment will continue even after the suit is decreed in favour of the plaintiff and re-attachment of the attached property in execution is not needed in view of Order 38 Rule 11 & 11A of the Civil Procedure Code.
However, the order of attachment before judgment will stand withdrawn on furnishing security by the defendant or with the dismissal of the suit as per the provision contained in Order 38 Rule 9 of the Civil Procedure Code.
Order of temporary injunction is essentially different from the order of attachment before the judgment as it losses its force with the disposal of the suit, be it decreed or dismissed.
Its operation cannot be extended beyond the disposal of the suit.
Thus, we hold that the Court’s power to grant temporary injunction cannot be treated at par with its power to pass an order of attachment before judgment under Order 38 Rule 5 of the Code of Civil Procedure.
Thus, while passing an order of temporary injunction, post decree consequences need not be considered by the Court, but while passing an order of attachment before judgment, the Court has to consider the post decree consequences.
As such the standard of proof in case of attachment before judgment is higher then the standard of proof necessary to be discharged in case temporary injunction is sought for.” In issuing temporary injunctions the tests to be applied are (i) whether the plaintiff has a prima facie case, (ii) whether the balance of convenience is in favour of the plaintiff, and (iii) whether the plaintiff would suffer an irreparable injury if his prayer for temporary injunction is disallowed.
The interlocutory remedy is intended to preserve in status quo the rights of parties which may appear on a prima facie case.
At the stage of deciding the application for temporary injunction, the Court is not required to go into the merits of the case in detail.
What the Court has to examine is (i) the plaintiff has a prima facie case to go for trial; (ii) the protection is necessary from that species of injuries known as irreparable before his legal right can be established; and (iii) that the mischief of inconvenience likely to arise from withholding injunction will be greater than what is likely to arise from granting it.
Rule 1 of Order 40 of the present Code of 1908 enables all courts to appoint a receiver “where it appears to the court to be just and convenient.” The words “just and convenient” in Or.
XL, r.1 are derived from the English Judicature Act which greatly enlarged the powers which the court of Chancery formerly exercised and the courts in India have the fullest jurisdiction to appoint as well as to remove a receiver in the exercise of a sound judicial discretion.
Mathuria Debya v Shibdayal Singh Hajari (1910) 14 CWN252.
It must be exercised on the same principle, that is to say, with a sound discretion, on a view of the whole circumstances of the case, not merely circumstances which might make the appointment expedient for the protection of the property, but all the circumstances connected with the right which is asserted and is to be established.(See.
Sidheswari Davi v Abhoyeswari Dabi ILR (1888) 15 Cal 818, 822,823).The term “receiver” has not been defined in the Code.
Stated simply receiver is a person who receives money of another and renders account.
In Halsbury’s Laws of England, (4th Edn).Vol.39, para 801, p.
403, it is stated, “A receiver is a person appointed for the collection or protection of property.” According to Kerr on Receiver (2001).he is “an impartial person appointed by the court to collect and receive, pending the proceedings, the rents, issues and profits of land, or personal estate, which it does not seem reasonable to the court that either party should collect or receive, or for enabling the same to be distributed among the persons entitled”.
The primary object of appointment of receiver is to preserve, protect and manage the property during the pendency of the litigation and determination of the rights of the parties by a competent court.
A receiver is an extended arm and hand of the court, who has been appointed for the benefit of all concerned.
He is the representatives of the court.
His appointment is in the interest of justice, where the court feels that it is not proper or reasonable that either party should hold the property pendente lite.
He is the representative of the court and holds the property as custodia legis subject to orders and directions of the court.
[See.S.Saleema Bi v.S.Pyari Begum, (2000) 9 SCC560 In Parmanand Patel v.
Chowgule, reported at (2009) 11 SCC127 AIR2009SC1593 the Apex Court ruled that a receiver can only be appointed when it is found to be just and convenient to do so.
Appointment of a receiver pendente lite is a matter in the discretion of the court.
The plaintiff must show not only prima facie case in his favour but also emergency, danger or loss demanding immediate action.
Danger to property and conduct of parties are important considerations.
In several cases, the Supreme Court has held that a receiver can only be appointed when it is found to be “just and convenient” to do so.
It has been described as the “most basic principle” governing the discretion of the court in appointing a receiver.
(Firm Ashok Traders v.
Gurumukh Das Saluja, (2004) 3 SCC155 AIR2004SC1433 It has, therefore, been said, “A court may appoint a receiver not as a matter of couRs.but as a matter of prudence having regard to the justice for the situation.” (Industrial Credit & Investment Corpn.
Of India Ltd.v.Karnataka Ball Bearings Corpn.
Ltd., (1999) 7 SCC488 AIR1999SC3438 The words “just and convenient” mean that it is practicable and in the interest of justice to appoint a receiver.
(Edwards & Co.v.Picard, (1909) 2 KB903(CA) The term “just” indicates that the action of appointment of receiver is in consonance with justice, equity and good conscience while the word “convenient” means that it is practicable, expedient and desirable on the facts and in the circumstances of the case.
Of Southamption, (1880) 16 Ch D143 The remedy of appointment of receiver is discretionary and equitable and must be exercised in the interest of justice.
No receiver can be appointed by the court simply because the court thinks it to be so, or such appointment would not cause harm or injury to the other side.
There are certain settled principles which have to be satisfied before a receiver is appointed.
The applicant has to show strong prima facie case in his favour.
He must also show that the property in dispute is in danger of being wasted or damaged and such appointment is intended to safeguard rights of the parties and is in the larger interests of justice.
(Bhupendra Nath Mookherjee v.
Monoher Mukherjee, AIR1924Cal
456) A receiver can be appointed in respect of “any property”.
Such property need not be the subject-matter of the suit nor the property need be situated within the territorial jurisdiction of the court.
Only thing is that the court must find it “just and convenient” to appoint a receiver in respect of such property.
(Madhu Lal v.
Ramji das Chironji Lal, AIR1953MB85 The exercise of the jurisdiction to appoint a receiver or issue an injunction is not a matter ex debito justice but one which is purely within the discretion of the Court.
The discretion should be governed by a view of the whole circumstances of the case and not merely by the consideration that it is lawful to do so.
A receiver should not be appointed in supersession of a bona fide possessor of property in controveRs.unless there is some substantial ground for interference.
Mathuria Debya vs Shibdayal Singh Hajari (1904)14 CWN252.
The words just and convenient in Or.
XL, r.1 of the Civil Procedure Code, 1908 mean that the court should appoint a receiver for the protection of property or the prevention of injury, according to legal principle and not that the court can make such appointment because it thinks convenient to do so.
Habibillah v Abtia Kallah (1915) 23 CLJ567) Kerr on Injunction states:“A receiver will not be appointed at the instance of a subsequent mortgagee if a prior mortgagee is in possession, unless the applicant will pay off the prior mortgagee’s demand.
If the prior mortgagee be not in possession, a subsequent mortgagee may obtain the appointment of a receiver, without prejudice to the right of the prior mortgagee to apply for possession.
Sewell, 1 J &W647.
A mortgagee by deposit of deeds may obtain an injunction, or the appointment of a receiver, for the protection of his security.
So also may a person who is possessed of an equitable lien.” In this proceeding, there cannot be any doubt that the plaintiff is an unsecured creditor.
The plaintiff claims that he had entered into an oral agreement for purchase of 21000 sq.
of “Avani Grand” to be developed and constructed at the said premises and purports to have made payment of a sum of Rs.21 crores against the allotment of unspecified area of 21000 sq.
in the residential block of the project.
The plaintiff claims that on the basis of the representation made by the respondents that the construction work would commence within August, 2014 and would be completed by December, 2016.
The plaintiff between 12th March, 2014 and 1st August, 2014 paid a sum of Rs.21 crores by RTGS to the defendant No.1.
Since the construction work did not commence, the respondent No.3 proposed to refund the said sum of Rs.21 crores with interest at the rate of 18% per annum till the date of repayment as also preestimated damage of Rs.8 crores by way of compensation upon the petitioner agreeing to terminate the said allotment.
It is claimed that the parties have mutually agreed to settle their disputes and the said respondent made payment of five instalments through RTGS aggregating to Rs.4.25 crores out of Rs.8 lakhs payable towards compensation and/or pre- estimated damages leaving balance amount of Rs.3.75 crores.
The petitioner has disclosed in paragraph 13 the particulars of the cheques aggregating to Rs.35,88,34,387/- payable on account of refund of the consideration amount along with pre-estimated damages and compensation.
The said cheques were dishonoured on presentation and returned to the plaintiff with the endorsement “insufficient funds”.
The twenty-three several cheques aggregating to a sum of Rs.35,88,34,387/- were issued by the respondent No.1 after deducting the amount of tax deducted at sources (TDS).The respondent also did not submit the certificate of tax deduction at sources in spite of requests.
The amount of TDS deducted by the respondent No.1 comes to Rs.1,23,70,489/-.
The plaintiff has filed the suit for recovery of the said amount.
In the said proceeding, G.A.No.1705 of 2017 has been filed by the plaintiff praying, inter alia, for attachment before judgment.
In the said proceeding, an order was passed on 14th June, 2017 in terms of Prayer (c) of the Notice of Motion which reads:- “(c).The respondents be directed to show cause as to why the respondents should not furnish security in the sum of Rs.45,00,00,000/- by way of Bank Guarantee or in such other form to the satisfaction of this Hon’ble Court as may be decided and in default of adequate cause being shown by the respondents, an order be passed for attachment before judgment.” A Special Officer was appointed to file a report with regard to the status of the said project.
The Special Officer in the report has stated that at the rear portion of the suit property some foundations have been laid and rods have been fixed.
The respondents were restrained from creating any further encumbrance in respect of the premises No.8, JBS Halden Avenue, Kolkata- 700 105 till the returnable date, this interim order was extended from time to time with the modification as indicated above.
The close nexus between the defendant Nos.1 and 2 cannot be disputed.
The lack of authority of the defendant No.3 to sign the letter dated 15th November, 2014 which document appears to be sheet anchor of the plaintiff in this proceeding, read with the other documents contemporaneously executed by the defendant No.3 on behalf of the defendant Nos.1 and 2 makes it difficult for this Court to accept that the defendant No.3 does not have the authority to sign any such letter on behalf of the defendant No.2.
It is also an admitted fact that a Joint Development Agreement was entered into by the defendant Nos.1 and 2 for construction of service apartments and other buildings at the said site.
However, the question arises even if one accepts that the defendant No.2 might have in November, 2014, had agreed to be jointly liable with the defendant No.1 to pay compensation to the plaintiff would give a right to the plaintiff to seek an attachment of the interest of the defendant No.2 in the property subject to mortgage.
Any order of attachment of the equity of redemption of the defendant in relation to the said property is likely to prejudice the right of Reliance who under the several agreements is entitled to various rights.
The said order, if passed, would eventually result in acknowledgement of a superior right of the plaintiff which the plaintiff could have had the plaintiff demonstrate the payments were made under an agreement for sale and they have not given their right over the property in question.
The said order virtually would result in creation of a third party interest which is prohibited under the existing agreement and/or arrangement between the Reliance and the defendant Nos.1 and 2.
The defendants under the said agreements are clearly restraining from creating any interest or charge over the said property without the consent.
Admittedly, Reliance has not given any consent to the defendants to encumber or create further charge.
An order of attachment in whatever form on the said property at this stage would certainly interfere with the existing right of the Reliance and would be an interference with the agreements between the Reliance and the defendants.
The right of a mortgagor, known as equity of redemption, is also immovable property though not for the purpose of determining the procedure appropriate to attachment.
Rup Lall; ILR (1886) 12 Cal 546, Lai Umrao v.
Lal Singh; ILR (1924) 46 All
917) An equity of redemption is immovable property and so is the mortgager’s interest in the immovable property.
In Sakhiuddin v.
Sonaullah, reported at (1917) 22 CWN641 AIR1918Cal 411 it was held that “a mortgage is not a mere debt; it represents a substantial intent in the mortgaged property, viz, the right of selling it under certain considerations for realisation of the debt.” Admittedly, the applicant has a superior right as a mortgagee in relation to the petitioner.
The documents disclosed by the applicant as well as the defendant No.2 in this proceeding clearly shows that the defendant No.2 was not authorized to create any mortgage or third party interest in respect of the property in question without the consent of Reliance.
It also, prima facie, appears that the debt in favour of the Reliance has not been discharged.
The moratorium period was continuing when the hearing was concluded.
The documents creating charge over various assets disclosed in this proceeding would also establish that the property in question has been charged in favour of the Reliance.
Irrespective of creation of charge there is an equitable mortgage of the property in favour of Reliance.
The defendant No.2 admittedly is the owner of the property.
The petitioner is only interested to realize its debt.
On the basis of the submission made on behalf of the defendant No.1, it is difficult to resist a judgment at least for a sum of Rs.16 crores.
A question, however, remains as to whether this particular property is required to be attached before a decree is passed in favour of the plaintiff.
Order 38 Rule 5 of the Code of Civil Procedure permits the plaintiff to seek attachment before judgment provided the requirements of Order 38 Rule 5 are complied with.
The defendant No.1 has filed an affidavit disclosing various assets and properties which are yet to be disposed of and the said properties are capable of fetching prices which would be adequate to meet the dues of the plaintiff, in the event, a decree is passed in favour of the plaintiff.
There cannot be any doubt that the order passed by this Court was over and in respect of the Haldane Avenue property and not restricted to the equity of redemption alone.
The entire interest of the right of the mortgagor, that is, the defendant No.2 has been attached.
The Court was not aware of the existence of a prior mortgage nor that the entire share of the defendant No.2 has been pledged with the applicant on 17th May, 2017.
If these full facts were known to the Court, the Court would not have passed any order concerning the said property, at this stage.
In Parashram Harlal (supra).the Division Bench was considering the situation where in execution of a money decree, the plaintiff attached the shops of the judgment-debtor.
The mortgagee applied for removal of the attachment on the ground that he was in possession of the shop as mortgagee of the judgment-debtor.
The Subordinate Judge held that shop being in the possession of the mortgagee, the equity of redemption could not be sold in execution.
The Division Bench on examination of facts held that in the instant case it was clearly intention of the attaching creditor to attach not the property itself but the equity of redemption of the judgment-debtor therein.
This is not the case here.
Similarly, in Kabidi Venku Sah (supra).the Hon’ble Supreme Court was considering Order 21 Rule 58(1) of the Code of Civil Procedure and it was held in the said decision that the attaching creditor can bring the property to sell only subject to the mortgage so long as it is subsisting, that is to say, he could bring only the mortgagor’s equity of redemption to sell if it had not already been extinguished by its sale on execution of any decree obtained on that mortgage.
In both the cases, it has to be noticed that the respective Courts were not considering a situation under Order 38 Rule 5 of the Code of Civil Procedure where orders are passed in contemplation of a decree likely to be passed in favour of the plaintiff.
In so far as the locus of the Reliance is concerned, I am unable to agree with the learned Senior Counsel of the plaintiff that the applicant has no right to intervene.
The applicant is certainly a person aggrieved by the order passed by this Court.
The applicant need not to make an application for addition of party as there would be a possibility of conflict of interest.
The applicant has filed this application only to put forth its prior right over the said property and invites this Court to pass appropriate orders so that the existing right of the applicant, vis-à-vis the property is no way impaired and/or affected by the orders passed by this Court.
In M/S.Gammon India LTD.(supra) it would be evident from the Paragraph 39 on which reliance has been placed that intervener had raised points which are not raised by the writ petitioner with regard to Section 28 of the Contract Labour Regulations and Abolition Act, 1970 on the ground that the said Section confers arbitrary and unguided power and, therefore, violating of Articles 14 and 15 of the Constitution of India.
petitioners did not challenge the said Section.
The writ The intervener may be supporting the writ petitioners but was independently challenging a provision of a statute and in that context it was held that the intervener cannot raise points which are not canvassed by the petitioners in the pleadings.
Similarly, in Dr.
Sudha Suri (supra) it was found on examination of facts that although each one of the parties may have some common grounds to challenge the final decision but to in substance they have divergent views and conflicting interests in the result of the writ petition.
Although, there cannot be any doubt that a receiver can be appointed over a property in an extraordinary situation but having regard to the nature of the dispute and the materials on record, a receiver over the Haldane Avenue Property cannot be appointed.
In Lalchand Chhaganmull (supra) in paragraph 31 it is stated:- “31.
One of such principles laid down in the said decision is that not only must the plaintiff show a case of adveRs.and conflicting claims to the property, but, he must show some emergency or danger or loss demanding immediate action and of his own right he must be reasonably clear and free from doubt.
The element of danger is an important consideration.” In the said case, it was found that there was a danger of loss of quality and price of the tea and the court has taken into consideration that element of danger and hence appointed a Receiver.
It is not the case here.
In the instant case as observed earlier, the applicant is aggrieved by the order obtained by the plaintiff.
The plaintiff may not be aware of all facts relating to the property.
The plaintiff may not be aware of the creation of equitable mortgage, facility agreement and creation of charges in favour of the applicants and, accordingly, it cannot perhaps be said that the plaintiff has suppressed any fact.
The defendant No.1 had referred to the mortgage as recorded in the order dated 14th June, 2017 but the documents were not produced.
Initially, the defendants were represented by Mr.Sanket Saraogi who had filed the Vakalatnama on behalf of the defendants, however, on 10th July, 2017, Mr.Jishnu Saha, the learned Senior Counsel who represented all the defendants on an earlier occasion on instruction submitted that he had now received instruction only to represent the defendant No.1 and not on behalf of other defendants.
The claim essentially is against the defendant No.1.
The letter dated 15th November, 2014 on which much emphasis has been laid on behalf of the plaintiff, in my view, prima facie is not enforceable against the defendant No.2 and more so in respect of the present property.
The defendant No.2 has been able to make out an arguable case on merit to resist any attachment of this property.
However, in view of the admission on behalf of the defendant No.1 at least to the extent of Rs.16 crores and the defendant No.1 is unable to presently pay the said sum, the interest of the defendant No.1 in the ongoing project is required to be attached.
Although, the JDA shows that the defendant Nos.1 and 2 have agreed to develop the said property and it contemplates revenue sharing and other terms akin to partnership but the said defendants have consciously in Clause 21.1 defined the relationship of the parties which clearly shows that the said agreement shall under no circumstance be taken as having created a partnership between the parties.
The reason is that the property, by that time, was mortgaged with the Reliance.
The defendant No.2 had raised a serious dispute with regard to the claim made by the plaintiff that there was no agreement for sale of a flat and the said consideration was not paid for the purpose of purchasing a flat as no particulars are mentioned in any of the correspondence between the parties.
In fact, except for the solitary letter dated 15th November, 2014 of Avani Group alleged to contain the signature of the defendant No.3 on behalf of the defendant Nos.1 and 2 has been a matter of much criticism both as to authenticity motive and authority to sign such letter on behalf of the defendant No.2.
Although, there cannot be any doubt that the defendant No.3 had the authority to represent the plaintiffs and the defendant No.2 as directors of the said defendants and the documents disclosed in this proceeding shows that the defendant No.3 in such capacity had represented the various authorities but it has to be seen whether the defendant No.3 could have created a special right in favour of the plaintiff concerning the said property when the defendant No.3 is clearly aware of the fact that there has been a subsisting mortgage in favour of the Reliance.
In fact, the said letter on which much emphasis has been laid on behalf of the plaintiff only shows that the defendant No.2 alleged to have made a representation that the defendant Nos.1 and 2 have agreed to allot 21,000 sq.ft.
of super built-up area in the said premises and since the construction of the project was delayed, the said defendants would refund a sum of Rs.21 crores paid towards final consideration amount and paid interests at the rate of 18% p.a.till the amount is repaid and damages aggregating to Rs.8 crores over and above the principal amount.
This letter at best can create a liability of the defendant No.2 to pay the said amount, in the event, the defendant No.1 fails to pay in terms of the said letter dated 15th November, 2014.
This letter does not create any interest in the subject property.
There cannot be any doubt that in a money claim, receiver or injunction or even attachment before judgment can be passed provided extraordinary circumstance exists.
Of the three reliefs that one is entitled under the law attachment is the harshest.
Mere inability to pay a sum does not call for attachment.
A serious dispute has been raised by the intervener and the defendant No.2 in respect of the property sought to be attached in this proceeding.
The plaintiff has given up his right over and in respect of the property at Haldane Avenue.
The consideration would have been different had there been an agreement of sale and a suit for specific performance is filed for enforcement of such agreement as in such a situation Reliance perhaps could not have objected to such relief as Reliance was aware of the purpose of loan and had agreed to sale of flats provided the considerations are deposited in an Escrow Account.
Reliance has charge over the receivables.
The documents disclosed both by Reliance and the defendant No.2 show creation of mortgage and charge on the properties.
On the basis of the documents disclosed in this proceeding, any order of attachment over the said property in question would seriously prejudice the right of Reliance who has already lent and advanced substantial amount to the defendant No.2 and is a mortgagee in respect of the property in question.
Moreover, in view of the existing obligation required to be discharged by the defendant Nos.1 and 2, the Reliance under the several agreements, the plaintiff is not entitled to any relief at this stage over and in respect of the said property.
However, the defendant No.1 has admitted that the defendant No.1 does not have any freehold property in its own name.
The defendant No.1 in an earlier proceeding being G.A.No.1880 of 2017 has filed an affidavit in which the defendant No.1 has disclosed particulars of five ongoing projects.
Since the said affidavit was filed in connection with another suit filed by the present plaintiff against the defendant No.1, the said affidavit is also treated as a part of this proceeding.
In Paragraph 4 of the said affidavit the defendant No.1 has made the following averments:- “4.
The defendant does not have any freehold property in its own name.
It has, however, from time to time entered into agreements for development of the real properties in Kolkata.
While many projects undertaken by the defendant under such joint development agreement have been completed and handed over to the purchasers of flats or units thereat or to the owners of the lands in so far as owner’s allocation is concerned, it presently has five ongoing projects, particulars whereof are as follows: a) Sr.Avani at 60 Ballygunge Circular Road, Kolkata 700 019 for construction of a building containing a basement, ground plus 25 upper floors containing 37 units/duplex apartments.
Under the joint venture agreement and the subsequent allocation agreement 6 units/apartments having an area of 33,000 sq.
of super built up area more or less, have been earmarked for the owners and will be required to be made over to them.
Out of the balance area (hereinafter referred to as the Developer’s Allocation) 30 units/ apartments have already sold by the defendant.
One unit/apartment has been mortgaged by the defendant in favour of one Cliff Trexim PVT.LTD.by a registered mortgage against a loan of Rs.12,50,00,000/- (Rupees twelve crores and fifty lakhs only).Out of the said loan amount, the defendant has till date been able to repay to the said mortgagor, a sum of Rs.5,25,00,000/- (Rupees five crores twenty five lakhs only).The mortgage of the said unit/ apartment as such still continues.
While conveyances of 25 out of the said 30 units/ apartments have already been executed and registered in favour of the buyers thereof.
Conveyance of the remaining units/apartments are still outstanding.
Further payment against the same have, however, been received by the defendant and possession of all the 25 units/apartments whose conveyances have been executed, have been made over by the defendant to the buyers thereof for carrying out interior decoration work.
By reason of want of funds the defendant has however, not yet been able to complete the exterior of the building or the common areas of the same including driveway, corridORS.elevatORS.generator room, car parking spaces, water tanks, swimming pool etc.for which it has approached the purchasers of units/apartments for further funds or a promise to return the same with interest.
While most of the unit/apartment owners have made such payments to the defendant, a few have not.
b) Another joint venture project at 136, Jessore Road, Kolkata- 700 055 named “Avani Oxford Phase II” is on the verge of completion.
The complex is comprised of 5 blocks of basement plus ground plus 14 floors consisting of altogether 504 flats, out of which 228 flats have been earmarked for the owneRs.The defendant out of its allocation of 276 flats have already sold the entire number of 276 flats.
While conveyance of 300 units/apartments have already been executed and registered in favour of the buyers thereof, possession has been given to over 430 buyers for carrying out necessary interior decoration work.
The defendant is now completing the exterior of the building/complex and/or the common areas of the same including driveway, corridORS.elevatORS.generator room, car parking spaces, water tanks, swimming pool etc.c) Another joint venture project at 58, Gourango Sarani, Kolkata 700 078 named “Avani Estates” is also on the verge of completion.
The complex is comprised of 4 blocks of ground plus 4 floors consisting of altogether 53 flats, out of which 17 flats have been earmarked for the owneRs.The defendant out of its allocation of 35 flats have already sold the entire number of 35 flats.
While conveyances of the units/apartments are yet to be executed and registered in favour of the buyers thereof possession has been given to about 10 buyers for carrying out necessary interior decoration work.
The defendant is now completing the exterior of the building/ complex and/or the common areas of the same including driveway, corridORS.elevatORS.generator room, car parking spaces, water tanks etc.d) Another project named “Avani Aspire” situated at Nibra, Kona Expressway, Howrah has been launched with Anupriya Management Private Limited being the owner of the land.
The project comprises of 17 blocks of G.Plus 4 stories out of which 5 blocks have been constructed.
A total number of 209 flats have been sold in the fiRs.11 blocks and 123 flats are unsold.
In the remaining 6 blocks the entire number of 167 flats is yet to be sold.
However, the entire project is mortgaged by way of fiRs.charge in favour of the State Bank of India, Stressed Assets Management Branch in respect whereof the State Bank of India has already invoked the provisions of the SARFASI Act, 2002 and served notices on the defendant under Sections 13(2) and 13(4) of the said Act.
e) Avani Grand at 8 J.B.S.Haldane Avenue, Kolkata 700 105 – The defendant has undertaken the said project in joint venture with a subsidiary company Adone Hotels and Hospitality Limited.
the said project is entirely mortgaged in favour of Reliance capital Limited now known as Reliance Commercial Finance Limited and Reliance Home Finance Limited.
This project is a subject matter of the C.S.No.113 of 2017 filed by one SESA International Limited a group company of the plaintiff abovenamed.
Reliance Commercial Finance Limited has filed on intervention application in the same highlighting its charge over the said project and the land comprised therein.
Separate bank accounts are maintained by the defendant in respect of “Sr.Avani”, “Avani Oxford (Phase II) and the “Avani Estates” Projects to ensure that the funds collected from the flat/unit owners of the said projects are not diverted to other projects or to meet the other financial obligations of the defendant.
Accordingly, on the basis of the understanding arrived at with the unit/ apartment owners of the said project members of the association of the unit/apartment owners of “Avani Estates” and “Sr.Avani” have been made joint signatories to the bank accounts, while the members of the Association of unit/ apartment owners of Avani Oxford (phase II) have been given viewing right of the accounts so as to allow them to monitor the day to day transaction carried on from the said account.
The particulars of the said bank accounts of the defendant are provided hereunder are as follows: i) For project “Sr.Avani” – A/C No.3064834792 maintained with Central Bank of India, Kolkata Main Branch.
ii) For project “Avani Estates” – A/c.
No.000003226900037 maintained with Deutsche Bank, Shakespeare Sarani Branch.
iii) For project “Avani Oxford II” A/c No.006211100000557 maintained with Andhra Bank, Ballygunge Branch.”
6. The defendant undertakes not to sell, alienate or encumber the unsold units/apartments in Avani Aspire which project however continues to remain mortgaged and charged in favour of the State Bank of India.” It is significant to mention there is no transaction between the plaintiff and the defendant No.2 and whatever the amount that has been received after 15th November, 2014 is from the defendant No.1.
Admittedly, the petitioner has given up his claim in respect of the said property and has agreed to accept refund of the consideration amount together with interest.
Under such circumstances, this Court is not inclined to pass any order of attachment in respect of the Haldane Avenue property.
However, since there is no defence to the claim of the plaintiff to the extent of at least Rs.16 crores approximately after giving adjustment of the sums received from the defendant No.1, Ms.Pritha Bhowmick, Advocate is appointed as receiver over and in respect of the bank accounts mentioned in paragraph 5 of the affidavit affirmed by the defendant no.1 in G.A.No.1880 of 2017 to ensure that the amounts collected by the defendant No.1 in respect of the “Sr.Avani”, “Avani Oxford (Phase II)” and the “Avani Estates” are not diverted to other projects or to meet the other financial obligations of the defendant no.1 and the arrangements and understanding pleaded in paragraph 5 of the said affidavit are followed.
The defendant no.1 and the members of the association of the unit/apartment owners of the three projects shall operate the said three bank accounts under the supervision of the receiver.
The parties shall immediately communicate this order to the Branch Manager of the Central Bank of India, Kolkata Main Branch, Deutsche Bank, Shakespeare Sarani Branch and Andhra Bank, Ballygunge Branch.
It appears from the affidavit filed by the defendant No.1 that there are some unsold flats in “Avani Aspires”.
The unsold flats may be sold with the consent of the State Bank of India, Stressed Assets Management Branch under the supervision of the receiver and the sale proceeds thereof shall be deposited with the said Bank in a separate account.
If after meeting the existing liability of SBI, there is a surplus amount, such sum not in excess of Rs.16 crores shall stand attached.
The costs, charges and expenses for such sale shall be borne by the plaintiff.
The defendant No.1 shall be entitled to pray for modification of this order as soon as the claim of the plaintiff is secured to the extent of Rs.16 crores.
The receiver shall be entitled to a monthly remuneration of 600 gms to be paid by the plaintiff.
This interim order shall continue till disposal of the suit.
The Applications being G.A.No.1919 of 2017, G.A.No.1705 of 2017 and G.A.2282 of 2017 are disposed of.
However, there shall be no order as to costs.
Urgent Photostat certified copy of this judgment, if applied for, be given to the parties on usual undertaking.
(Soumen Sen, J.)