Calcutta High Court
Pulak Modi & Anr vs Jitendra Agarwal @ Ors on 13 August, 2024
OCD- 15 &16
IN THE HIGH COURT AT CALCUTTA
ORIGINAL SIDE
COMMERCIAL DIVISION
G.A. (Com) 1 of 2024
With
G.A. (COM) 2 of 2024
In
C.S. (COM) No. 728 of 2024
PULAK MODI & ANR.
-VS-
JITENDRA AGARWAL @ ORS.
BEFORE:
The Hon'ble JUSTICE KRISHNA RAO
Hearing Concluded On : 09.08.2024
Order On : 13.08.2024
Appearance:
Mr. Sabyasachi Choudhury, Adv.
Mr. Rajarshi Dutta, Adv.
Mr. V.V.V. Sastry, Adv.
Mr. Rahul Poddar, Adv.
... For the plaintiffs.
Mr. Ranjan Bachwat, Sr. Adv.
Mr. Subhasish Sengupta, Adv.
Mr. Orijit Chatterjee, Adv.
Ms. Swati Dalmia, Adv.
Mr. Bhavesh Garodia, Adv.
Mr. Safura Ahmed, Adv.
... For the defendants.
2
ORDER
1. The plaintiffs have filed the present application for grant of interim
order against the defendants for furnishing security for the sum of Rs.
50,00,000/- and allied prayers. The defendants have filed an
application being GA (COM) 2 of 2024 praying for revocation of leave
granted under Section 12A of the Commercial Courts Act, 2015.
2. The plaintiff no. 1 held Rs. 5,00,000/- equity shares of Rs. 10/- each
fully paid up in the defendant no. 5 company representing 50% of the
paid-up equity share capital of the defendant no. 5 company. The
plaintiff no. 2 held Rs. 4,10,000/- fully paid-up Preference Shares of
Rs.100/- each in defendant no. 5 company, representing 50% of the
paid-up preference share capital of the defendant no. 5 company and
remaining 50% preference share capital of the defendant no. 5
company was held by the defendant nos. 8 & 9.
3. The shares so held by the plaintiffs in the defendant no. 5 company
comprised 50% of the total paid-up equity shares and 50% of the total
Preference shares in the defendant no. 5 company. The remaining 50%
of total equity shares and remaining 50% of the total Preference Shares
in the defendant no. 5 company were held by the defendant nos. 6 to 9.
4. The defendant no. 5 company has a wholly own subsidiary registered in
Georgia under the name, Ambicon Steels LLC (herein after referred to
as "ASL") with its registered office in Georgia. The Ambicon Steels LLC
runs and operates a steel plant at Kutaisi, Georgia taken on lease from
one Eurasian Steels LLC (herein after referred to as "ESL"), a limited
liability company, registered in Georgia. The steel plant was leased by
Eurasian Steels LLC to Ambicon Steels LLC by an Indenture of Lease
dated 12th February, 2019 entered by and between ASL and ESL.
5. The plaintiffs and the proforma defendants upon deliberation and
discussion with the defendant nos. 1 to 4 sold their entire equity and
preference shareholding in the defendant no. 5 company to the
defendant nos. 1 and 4 as per the Share Sale Contract (herein after
called "the said Contract") dated 14th April, 2023. As per the said
Contract, the plaintiffs have sold and transferred their entire 50%
shareholding in the defendant no. 5 company in favour of the defendant
nos. 1 and 4.
6. In part discharge of their obligation to effect payment of the agreed sale
price of the shares under the said Contract, the defendants have paid
only first installment of the agreed sale consideration money to the
plaintiffs by effecting payment of Rs. 1 crore by a cheque dated 14th
April, 2023. Apart from making payment of the first installment, the
defendants have not paid any subsequent installment as agreed under
the said Contract.
7. The defendant nos. 1 to 4 jointly and severally undertook and
guaranteed to effect payment of the agreed remaining consideration of
Rs. 6,93,70,000/- payable by the defendants to the plaintiffs under the
said Contract in three installments. It is evident from the said Contract,
time is essence of the contract and due to delay caused by the
defendant nos. 1 to 4 in effecting payment of remaining consideration,
the plaintiffs had suffered immense, prejudice and injury.
8. As the defendant nos. 1 to 4 failed and neglected to pay the balance
remaining consideration of Rs. 6,93,70,000/- to the plaintiffs,
accordingly, the plaintiffs had sent a notice on 14th March, 2024,
calling upon the defendant nos. 1 to 4 to pay their aforesaid amount
along with interest @ 15% per annum and the said notice was duly
served upon the defendant nos. 1 to 4. On receipt of the said notice, on
12th April, 2024, the defendant nos. 1 to 4 had sent a reply by taking a
purported plea contrary to the express terms and conditions of the said
Contract. The plaintiffs again on 16th April, 2024, sent a notice to the
defendant nos. 1 to 4 by repeating and reiterating its contentions made
in the notice dated 14th March, 2024. On 10th June, 2024, the
defendants had sent a notice calling upon the plaintiffs to refund a sum
of Rs.1,00,00,000/- (one crore) and to take back the shares and replace
their directors upon return of the said sum together with interest.
9. Mr. Sabyasachi Choudhury, Learned Advocate representing the
plaintiffs submits that as per the said Contract, the defendant nos. 1 to
4 had acquired full ownership and control of the company and taken an
immediate possession and control of the Steel Plant on as is where is
and as is what it is basis, on the terms and conditions of the said
Contract. He submits that it is evident from the agreement that the
plaintiffs had made no covenant, representation or warranty in relation
to the Steel Plant and physical possession thereof upon purchase of the
sales shares by the defendant nos. 1 and 4 which was received and
accepted by the defendant nos. 1 to 4 and on where is and as is what it
is basis.
10. Mr. Choudhury submits that plaintiff no. 1 is entitled an aggregate sum
of Rs. 50,00,000/- towards the sale of the equity shares in defendant
no. 5 company, which the defendant nos. 1 to 3 are liable to pay on
and from 14th July, 2023. He submits that the plaintiff no. 2 is entitled
to an aggregate sum of Rs. 6,43,70,000/- towards the sale of the
preference shares in the defendant no. 5 company for which the
defendant no. 4 is liable to pay Rs. 50,00,000/- on and from 14th July,
2023, Rs. 2 crores on and from 14th January, 2024 and Rs.
3,93,70,000/- on and from 13th April, 2024.
11. Mr. Choudhury submits that the defendant nos. 1 to 5 have committed
breach of the terms and conditions contained in the Share Sale
Agreement dated 14th April, 2023 by not paying the amount to the
plaintiffs within the prescribed time as mentioned in the said Contract.
He submits that the plaintiffs have serious apprehensions of the
financial conditions and liquidity of the defendant nos. 1 to 5. He
submits that the defendants are in the process of dealing with or
disposing of or alienating its assets and properties and also trying to
remove the amounts lying in their bank accounts in order to render the
suit filed by the plaintiffs infructuous.
12. Mr. Choudhury submits that the defendant no. 1 is the Director of 12
companies and after ascertaining the same from the records obtained
from the portal of the Ministry of Corporate Affairs, the plaintiffs came
to know that the defendant no. 1 is in precarious financial condition
and out of 12 companies where the defendant no. 1 is the Director, four
companies have been struck off.
13. Mr. Choudhury submits that the plaintiffs apprehends that the
defendant nos. 1 to 5 with the intent to obstruct and delay, the process
of satisfaction of the decree that may be passed in the present suit,
may deal or dispose of part or whole of the properties owned by the
defendants on account whereof it is absolutely imperative to direct the
defendants to furnish substantial security and attachment of whole or
any part or portion of the properties of the defendant nos. 1 to 5.
14. Mr. Choudhury in support of his submission relied upon the judgment
in the case of Rahul S. Shah -vs- Jitendra Kumar Gandhi & Ors.
reported in (2021) 6 SCC 418 and submitted that in a suit for payment
of money, before settlement of issues, the defendant may be required to
disclose his assets on oath, to the extent he is being made liable in the
suit. He further submits that the Court may further at any stage, in
appropriate cases, during the pendency of the suit, using powers under
Section 151 of the Code of Civil Procedure, 1908, demand security to
ensure satisfaction of any decree.
15. Mr. Choudhury in support of his submission relied upon the judgment
in the case of Tata Chemicals Limited -vs- Kshitish Bardhan
Chunilal Nath & Ors. reported in 2022 SCC OnLine Cal 3343 and
submitted that there cannot be an absolute proposition that in a money
claim, no order of injunction or attachment or receiver could be made.
He submits that Order XXXVIII to Order XL of the Code of Civil
Procedure, does not restrict the power of the Court to pass any order
that a court is empowered to pass just because it is a money claim.
16. Mr. Choudhury in support of his submission relied upon the judgment
in the case of Yamini Manohar -vs- T.K.D. Keerthi reported in (2024)
5 SCC 815 and submitted that the plaintiff has filed the present
application without invoking the provisions of pre-institution mediation
process as the plaintiff prayed for an urgent relief. He submits that the
plaintiff has categorically mentioned that the plaintiff intend to file an
application praying for urgent reliefs in aid of the suit and it is not
possible for the plaintiff to exercise the remedy pre-institution
mediation as contemplated under Section 12A of the Commercial
Courts Act, 2015. He submits that the plaintiff has also categorically
made out a case that the dispute raised in the instant suit arose from
the said Contract and the claim of the plaintiffs is more than Rs.
30,00,000/- and the subject matter of the dispute in the present suit
falls within the meaning of commercial dispute.
17. Mr. Choudhury in support of his submission relied upon the judgment
in the case of Gavrill Metal Private Limited -vs- Maira Fabricators
Pvt. Ltd. reported in 2023 SCC OnLine Cal 2443 and submitted that
the legislature has used the expression contemplated to express the
intention that an interim relief may be required at the time of filing of
the suit or may be required at any time, the defendant expresses an
intention to do some act to defeat the decree to be passed.
18. Mr. Ranjan Bachwat, Learned Senior Advocate, representing the
defendants submits that plaintiff no. 1 had represented that the plant
was fully operational and had all necessary licenses, permissions and
authorizations for running the same, accordingly, the plaintiff no. 1
was in a position to give effective control and management of the said
steel plant to the defendant no. 1 which would otherwise be a time
consuming and tricky exercise. He submits that on this basis, the
Memorandum of Understanding dated 23rd February, 2023 and
subsequently Share Sale Contract was entered with the sole objective of
getting trouble free control and management of Ambicon Steels LLC
and the said Steels LLC Plant located at Kutaisi at Georgia.
19. Mr. Bachwat submits that the plaintiffs have not made the ASL as
party to the suit as on the date of agreement, possession of the factory
is with the ASL. He submits that the agreement was entered between
the parties on 14th April, 2023 and as per the agreement, the
defendants had to pay the amount in installments but when the
defendants have not paid the amount, the plaintiffs have not made any
request to the defendants for making payment till 14th March, 2024 as
the plaintiffs were waited for 9 months.
20. Mr. Bachwat submits that the plaintiffs have not made out any prima
facie case and the plaintiffs have suppressed the material facts. He
submits that the contract entered between the plaintiffs and the
defendants is closed by the notice dated 10th June 2024, the
defendants have called upon the plaintiffs to return the amount of Rs. 1
crore and to take back the shares and replace the directors of the
defendants upon return of the amount with interest.
21. Mr. Bachwat submits that plaintiffs are deliberately not disclosed the
basis upon which the Share Sale Contract was executed. He submits
that the "Uniglobal Papers Private Limited" is a company owned or in
control of the defendant no. 1 has acquired "BKM Industries Limited"
by virtue of an order passed by the National Company Law Tribunal,
Kolkata Bench. The assets of "BKM Industries Limited" included
investments in Eurasian Ventures FZE, UAE and Eurasian Steel LLC,
Georgia which was the owner of a steel plant located at Kutaisi,
Georgia. Accordingly, acquisition of "BKM Industries Limited" would
have given control of the said steel plant.
22. Mr. Bachwat submits that the plaintiffs had only informed the
defendants of some minor environmental issues regarding the plant
which were in the position of being resolved in the next few days. It was
represented that the same was a minor issue which would not come in
the way of operation of the plant. He submits that it was only
afterwards, the defendants came to know the defendants had been
induced to enter into the Memorandum of Understanding and Share
Sale Contract by misrepresentation and fraud and there were serious
issues regarding the safety of the steel plant as well as serious violation
regarding non-compliance of environmental rules to the extent that the
plant is directed to be shut down on 5th June, 2023.
23. Mr. Bachwat submits that it was agreed between the parties that
payments required to be made under the agreement would be
postponed until such issues are resolved and all payments required to
be made under our agreement were kept in abeyance with the
concurrence of parties under the Shares Sale Contract.
24. Mr. Bachwat submits that the plaintiffs have only transferred the
shares of AVPL but have failed to transfer of the possession and control
of the steel plant. The document relied upon by the plaintiffs only a
paper possession as the control of ASL was never transferred to the
defendants.
25. Mr. Bachwat submits that the plaintiffs have not made out any prima
facie case and in the absence of the prima facie case, no discretion can
be used by this Court under Section 151 of the CPC for furnishing
security. He submits that the plaintiffs failed to establish impeccable
claim and have suppressed vital documents. He submits that the
plaintiffs have not challenged the termination of Share Sale Contract
and the claim of the plaintiffs in the nature of specific performance is
not maintainable.
26. Mr. Bachwat has relied upon the judgment in the case of Premraj
Mundra -vs- Md. Maneck Gazi and Ors. reported in AIR 1951 Cal
156 and submitted that the Calcutta High Court formulated guidelines
to be followed in the cases of attachment before judgment under Order
XXXVIII Rule 5 of the Code of Civil Procedure, 1908 but in the present
case, the case of the plaintiffs is not covered under any of the
conditions of guidelines fixed by the Hon'ble Court.
27. Mr. Bachwat has relied upon the judgment in the case of Raman Tech.
& Process Engg. Co. & Anr. -vs- Solanki Traders reported in (2008)
2 SCC 302 and submitted that it is well settled 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 the plaintiff establishes
that the defendant is attempting to remove or dispose of his assets with
the intention of defeating the decree that may be passed.
28. Mr. Bachwat has relied upon the judgment in the case of Sunil
Kakrania & Ors. -vs- M/s. Saltee Infrastructure Limited & Anr.
reported in 2009 SCC OnLine Cal 1638 and submitted that in a
money suit merely because the plaintiff has made out a strong case on
merit, a Court cannot restrain the defendant from transferring or
alienating his movable and immovable property during the pendency of
the case.
29. Mr. Bachwat has relied upon the judgment in the case of Mascot
Petrochem Private Limited -vs- SB Construction & Co. & Ors.
reported in 2024 SCC OnLine Cal 5942 and submitted that this Court
relying upon the judgment of Raman Tech. (supra), has come to the
conclusion that the application based on apprehension and bald
statement without any documents not sufficient for an order of
attachment under order XXXVIII Rule 5 of the Code of Civil Procedure,
1908.
30. Mr. Bachwat submits that the disputes between the parties in the
present suit are not coming under the commercial dispute and thus the
leave granted under Section 12A of the Commercial Courts Act, 2015,
is required to be revoked and there is no urgency in the present
application.
31. Mr. Bachwat submits that Section 2(1)(c)(i) is not applicable without a
mercantile document. He submits that Share Sale Contract dated 14th
April, 2023 cannot be termed as a shareholders agreement in view of
the judgment in the case of Rachit Malhotra -vs- One97
Communications Limited reported in 2018 SCC OnLine Del 12410
and submitted that a Share Purchase Agreement does not qualify for
shareholders agreement in view of the commercial dispute.
32. Mr. Bachwat submits that Section 2(1)(c)(xviii) of the Commercial
Courts Act, 2015, deals with agreements for sale of goods or provision
of services. The shares or stock comes under the purview of goods
under the Sales of Goods Act, 1930 but the Share Sale Contract dated
14th April, 2023 is not an agreement for sale.
33. Heard the Learned Counsel for the respective parties, perused the
materials on record and the judgments relied by the parties. On 14th
April, 2023, the said Contract was entered between the parties. On the
date of the said Contract, the defendant no.1 has issued a cheque
dated 14th April, 2023 in the name of the plaintiff no. 1 for a total sum
of Rs. 1 crore. On the same day, the defendant no. 5 had issued a letter
to the defendant no. 1 informing that as per the letter of the defendant
no. 1, the transfer of 3,35,000 shares from the plaintiff no. 1 in favour
of the defendant no. 1 has been given effect to in the Board Meeting
held on 14th April, 2023. In the said letter, the share certificate was also
enclosed, on the same day, the defendant no. 5 had issued a letter to
the defendant no.2 informing that as per the request of the defendant
no. 2, the plaintiff and Shri Ashish Chhawchharia have transferred
3,35,000 shares in favour of the defendant no. 2 and the said transfer
had given effect to in the Board Meeting held on 14th April, 2023. In the
said letter, the share certificate was also enclosed for the record of the
defendant no. 2.
34. In the letter dated 12th April, 2024, the defendant no.1 has stated that
the plaintiffs took the defendant no.1 to Kutaisi, Georgia where the
defendants had an opportunity to inspect the plant, machinery and
equipment when the plaintiffs had agreed to make over various
documents relating to running, operations and finances of the said
plant to enable the defendants to take a proper decision in the matter.
35. On 14th April, 2023, the defendant no.1 has executed a document
which reads as follows:
"I, Jitendra Agarwal representing the
intending Purchasers, namely, (i) Sri Jitendra
Agarwal, (ii) Jitendra Agarwal (HUF), (iii) Smt.
Shilpa Agarwal and (iv) Rashi Impex Private
Limited who have agreed to purchase and takeover
the entire shareholding in Ambicon Ventures
Private Limited having its registered office at 8A &
8B Satyam Towers, 3 Alipore Road, Kolkata -
700027 and held by Sri Pulak Modi, Sri Ashish
Chhawchharis, Sri Kshitiz Chhawchharia, Labh
Combines Private Limited Adarsh Mercantile
Limited and Gallon Holding Private Limited and
consequently also take over the control and
management of its wholly-owned Subsidiary,
Ambicon Steels LLC, Georgia which is operating a
Steel Plant at Kutaisi, Georgia, do hereby confirm
that pending execution in India of the Share Sale
Contract which has been negotiated, agreed and
made ready for execution upon my return to India, I
have on the 1st day of April, 2023 received khas
physical possession of the said Steel Plant which
has been handed over to me by aforesaid Sri Pulak
Modi who had accompanies me to the said Steel
Plant at Georgia for the purpose . A summary of the
inventory of the assets and properties within the
said Steel Plant undertaken and confirmed by me
is attached hereto marked "Annexure 1" and I do
hereby confirm having received physical
possession thereof upon my undertaking to execute
the said Share Sale Contract once I am back in
India.
Signed at Kolkata, India on this 14th day of
April, 2023."
The defendant no.1 has not denied the said document but only
taken the plea that the possession of the plant was on paper. In the
said Contract, it is categorically mentioned that "the purchasers have a
potential interest in the said ESL and accordingly were keen to avoid
future complications and disputes, and accordingly, upon discussion
with the sellers have therefore acquire full ownership and control of the
Company from the sellers and have taken immediate possession and
control of the steel plant on as is where is basis and as is what it is basis
on the terms and price as stated above".
If the document executed by the defendant no.1 dated 14.04.2023
is read with the clause mentioned of the contract prima facie there will
be no doubt that the defendants have taken possession of the said
plant.
36. As per the case made out by the defendants that immediately after the
agreement dated 14th April, 2023, the plant was shut down by the
authorities on 22nd May, 2023 on account of safety issues but
defendants were silent till 12th April, 2024 and only after receipt of
notice from the plaintiff dated 14th March, 2024, wherein the plaintiffs
have called upon the defendants for payment of balance amount as per
contract, the defendants have raised the said issue first time in their
reply dated 14th April, 2024.
37. The defendants have also stated that nothing was done in respect of its
100% subsidiary as the associates of the plaintiffs who were directors
continued to be Directors in the said company and neither the
defendants nor their associates were inducted as Directors of ASL and
control of the Georgian company is continued to remain with the
plaintiffs along with the principal assets but the said contention of the
defendants are not in conformity with the record. As per the said
Contract, time schedule of payment is agreed between the parties.
Admittedly, the defendants have paid the initial amount
Rs.1,00,00,000/- to the plaintiffs but thereafter no payment is made.
The defendants have stated that on 22nd May, 2023, the plant was shut
down by the authorities but the same was never informed by the
defendants to the plaintiffs till receipt of notice from the plaintiff.
38. The acquisition of BKM Industries by the respondents was after the
execution of the said Contract. The respondent no.5 has wholly owned
subsidiary company registered in Georgia in the name of Ambicon
Steels LLC which runs and operates a steel plant taken on lease from
one Eurasian Steels LLC. The defendants have admitted in the letter
dated 12th April, 2024 stating that:
"As is known to you, we, through our
company, namely, Uniglobal Papers Private Limited
have acquired BKM Industries Limited. The assets
of BKM Industries Limited included investments in
Eurasian Ventures FZE, UAE and Eurasian Steel
LLC, Georgia which was the owner of a steel plant
located at Kutaisi, Georgia. Accordingly, acquisition
of BKM Industries Limited would have given us
control of the said steel plant."
Therefore, by acquiring BKM Industries Limited, the defendants
claimed to have ownership of the steel plant which was owned by
Eurasian Steels LLC. In order to perfect its possessory right, as
Ambicon Steels LLC had the leasehold interest in respect of steel plant,
the said contract was entered into to acquire the shareholding in the
defendant no.5 which through its 100% subsidiary being Ambicon
Steels LLC held the leasehold interest in the steel plant. As per
document executed by the defendant no.1, the possession of the steel
plant has also taken by the defendants.
39. The defendants now called upon the plaintiffs to refund of amount of
Rs. 1,00,00,000/- and taking back the shares and to replace their
directors. The claim made by the defendants in their notice is subject
matter of trial but from the said notice, the defendants have admitted
with regard to execution of the contract and payment of only Rs.
1,00,00,000/-.
40. In the case of Premraj Mundra (Supra), this High Court has
formulated guidelines which are to be followed in cases of attachment
before judgment. In the case of Raman Tech (Supra), the Hon'ble
Supreme Court held that just and valid claim or a prima facie case, will
not entitled the plaintiff to an order of attachment before judgment
unless, the defendant is attempting to remove or dispose of his assets
with the intention of defeating the decree that may be passed.
41. Recently, three judges of the Hon'ble Supreme Court in the case of
Rahul S. Shah (supra), held that as follows:
"41. Having regard to the above background,
wherein there is urgent need to reduce delays in
the execution proceedings we deem it appropriate
to issue few directions to do complete justice. These
directions are in exercise of our jurisdiction under
Article 142 read with Article 141 and Article 144 of
the Constitution of India in larger public interest to
subserve the process of justice so as to bring to an
end the unnecessary ordeal of litigation faced by
parties awaiting fruits of decree and in larger
perspective affecting the faith of the litigants in the
process of law.
42. All courts dealing with suits and execution
proceedings shall mandatorily follow the below
mentioned directions:
42.1. In suits relating to delivery of
possession, the court must examine the parties to
the suit under Order 10 in relation to third-party
interest and further exercise the power under Order
11 Rule 14 asking parties to disclose and produce
documents, upon oath, which are in possession of
the parties including declaration pertaining to third-
party interest in such properties.
42.2. In appropriate cases, where the
possession is not in dispute and not a question of
fact for adjudication before the court, the court may
appoint Commissioner to assess the accurate
description and status of the property.
42.3. After examination of parties under
Order 10 or production of documents under Order
11 or receipt of Commission report, the court must
add all necessary or proper parties to the suit, so
as to avoid multiplicity of proceedings and also
make such joinder of cause of action in the same
suit.
42.4. Under Order 40 Rule 1 CPC, a Court
Receiver can be appointed to monitor the status of
the property in question as custodia legis for proper
adjudication of the matter.
42.5. The court must, before passing the
decree, pertaining to delivery of possession of a
property ensure that the decree is unambiguous so
as to not only contain clear description of the
property but also having regard to the status of the
property.
42.6. In a money suit, the court must
invariably resort to Order 21 Rule 11, ensuring
immediate execution of decree for payment of
money on oral application.
42.7. In a suit for payment of money, before
settlement of issues, the defendant may be
required to disclose his assets on oath, to the
extent that he is being made liable in a suit. The
court may further, at any stage, in appropriate
cases during the pendency of suit, using powers
under Section 151 CPC, demand security to ensure
satisfaction of any decree.
42.8. The court exercising jurisdiction under
Section 47 or under Order 21 CPC, must not issue
notice on an application of third party claiming
rights in a mechanical manner. Further, the court
should refrain from entertaining any such
application(s) that has already been considered by
the court while adjudicating the suit or which
raises any such issue which otherwise could have
been raised and determined during adjudication of
suit if due diligence was exercised by the applicant.
42.9. The court should allow taking of
evidence during the execution proceedings only in
exceptional and rare cases where the question of
fact could not be decided by resorting to any other
expeditious method like appointment of
Commissioner or calling for electronic materials
including photographs or video with affidavits.
42.10. The court must in appropriate cases
where it finds the objection or resistance or claim to
be frivolous or mala fide, resort to sub-rule (2) of
Rule 98 of Order 21 as well as grant compensatory
costs in accordance with Section 35-A.
42.11. Under Section 60 CPC the term "... in
name of the judgment-debtor or by another person
in trust for him or on his behalf" should be read
liberally to incorporate any other person from
whom he may have the ability to derive share,
profit or property.
42.12. The executing court must dispose of
the execution proceedings within six months from
the date of filing, which may be extended only by
recording reasons in writing for such delay.
42.13. The executing court may on
satisfaction of the fact that it is not possible to
execute the decree without police assistance, direct
the police station concerned to provide police
assistance to such officials who are working
towards execution of the decree. Further, in case
an offence against the public servant while
discharging his duties is brought to the knowledge
of the court, the same must be dealt with
stringently in accordance with law.
42.14. The Judicial Academies must prepare
manuals and ensure continuous training through
appropriate mediums to the court personnel/staff
executing the warrants, carrying out attachment
and sale and any other official duties for executing
orders issued by the executing courts.
43. We further direct all the High Courts to
reconsider and update all the Rules relating to
execution of decrees, made under exercise of its
powers under Article 227 of the Constitution of
India and Section 122 CPC, within one year of the
date of this order. The High Courts must ensure
that the Rules are in consonance with CPC and the
above directions, with an endeavour to expedite the
process of execution with the use of information
technology tools. Until such time these Rules are
brought into existence, the above directions shall
remain enforceable."
42. In paragraph 42.7, the Hon'ble Supreme Court clarified that at any
stage, in appropriate cases during the pendency of the suit, using
power under Section 151 CPC, demand security to ensure satisfaction
of any decree. In the present case the plaintiffs have claimed money
decree with interest as per the said Contract. The defendants have not
denied with regard to the execution of the said Contract and the agreed
amount of the parties. As per documents, the steel plant is in
possession of the defendants on receipt of notice from the plaintiffs, the
defendants claim for refund of amount.
43. Considering the above, this Court finds that the plaintiffs have made
out a prima facie case and balance of convenience in favour of the
plaintiffs. There is no denial with regard to execution of contract and
payment of part amount. It is also not denied that as per contract, the
defendants have not paid the further installments to the plaintiff as
agreed between the parties. Though the defendants have denied with
regard to the possession but prima facie it reveals that the defendants
have taken possession of the plant.
44. The plaintiffs have specifically pleaded in the application that the
defendant no.1 is the Director of 12 companies and obtained records
from the portal of Ministry of Corporate Affairs and came to know that
the defendant no.1 is in precarious financial condition and out of 12
companies where the defendant no.1 is the Director, 4 companies has
been struck off. It is also pleaded that there is an apprehension of the
financial conditions and liquidity of the defendant no.1 to 5.
45. In the case of Tata Chemicals Limited Vs. Kshitish Bardhan
Chunilal Nath and Others reported in 2022 SCC OnLine Cal 3343,
the Division Bench of Calcutta High Court held that there cannot be an
absolute proposition that in a money claim no order of injunction or
attachment or receiver could be made. The Hon'ble Court held that
Order 38 to Order 40 of the Code of Civil Procedure does not restrict
the power of the Court to pass any order that a Court is empowered to
pass just because it is a money claim.
46. In view of the above, this Court finds that this is a fit case for invoking
the provisions of Section 151 of the Code of Civil Procedure, 1908. The
defendant nos. 1 to 5 are restrained form operating the bank account of
Federal Bank Account No. 11030100239718, C.R. Avenue Branch,
Kolkata by keeping aside an amount of Rs.6,93,70,000/- till 17th
September, 2024.
47. As regard revocation of leave granted under Section 12A of the
Commercial Courts Act, 2015, the plaintiffs have filed the suit on the
basis of the Contract dated 14th April, 2023. In the case of Rachit
Malhotra (supra), the Delhi High Court held that:
"23. The counsel for the applicant/defendant
draws attention to clause (xii) of Section 2(c) of the
Commercial Courts Act which makes a dispute
arising out of a shareholders agreement, a
commercial dispute. It is argued that an agreement
for purchase of shares qualifies as a shareholder
agreement.
24. I am unable to agree. A shareholder
agreement denotes an agreement whereunder all
shareholders or a shareholder of the company
agree on the management of the company. ESOP
Scheme, 2008 is merely an option available to the
employees of the applicant/defendant to acquire
shares of the applicant/defendant and would not
qualify as a shareholders agreement."
In the present case upon discussion with the sellers, the
purchasers have acquired full ownership and control of the company
from the sellers and the purchasers have taken immediate possession
and control of the steel plant on as is where is basis and as is what it
is basis on the terms and price stated in the said Contract.
Considering the above, the judgements referred by the Counsel for the
defendants in the case of Rachit Malhotra (supra), are
distinguishable from the facts of this case.
48. Recently the Hon'ble Supreme Court in the case of Yamini Manohar
Vs. T.K.D. Keerthi reported in (2024) 5 SCC 815 held that:
5. Section 12-A of the CC Act does not
contemplate leave of the court, as is clear from the
language and words used therein. Nor does the
provision necessarily require an application seeking
exemption. An application seeking waiver on
account of urgent interim relief setting out grounds
and reasons may allay a challenge and assist the
court, but in the absence of any statutory mandate
or rules made by the Central Government, an
application per se is not a condition under Section
12-A of the CC Act; pleadings on record and oral
submissions would be sufficient.
In the present case, the plaintiffs have made a specific averment
why the plaintiffs have not exercised the remedy of pre institution
mediation and the urgency for filing the suit. The plaintiffs have also
filed an application for urgent interim relief. Considering the plaint as a
whole this Court did not find any reasons to revoke leave granted under
Section 12A of the Commercial Courts Act, 2015. Accordingly, G.A.
(Com) No. 2 of 2024 is dismissed.
49. The plaintiffs are directed to serve the copy of application, documents
and plaint to the defendants and to file affidavit of service on the
returnable date.
50. List the matter on 17th September, 2024 as "New Motion".
(Krishna Rao, J.)
p.d/-
