Jawahar Lal Nehru Hockey ... vs M/S. Radiant Sports Management ...
2008 Latest Caselaw 1980 Del

                             Unreportable
               IN THE HIGH COURT OF DELHI AT NEW DELHI

                            +EFA (OS) No. 17/2008

                                              Date of Decision: 07.11.2008

#Jawahar Lal Nehru Hockey Tournament Society                .....Appellant

!                                     Through: Mr.Pinaki Misra, Sr. Advocate
                                      Mr.Sandeep Sharma and Mr.Vikas Sharma

                   Versus

$M/s.Radiant Sports Management (P) Ltd.                  ......Respondents

                                      Through Mr.Anupam Srivastava

CORAM :-
*THE HON'BLE MR.JUSTICE A.K.SIKRI
THE HON'BLE MR. JUSTICE MANMOHAN SINGH

      1.Whether Reporters of Local papers may be allowed to
        see the Judgment?
      2.To be referred to the Reporter or not?
      3.Whether the judgment should be reported in the Digest?

A.K. SIKRI, J. (Oral)

:

1. The appellant is the decree holder, who is seeking to execute the

decree to recover the amount awarded in its favour. For this purpose

it filed Execution Petition No.38/2000 in this Court. In the said

execution, property bearing No.S-524, Second Floor, Greater Kailash-I,

New Delhi (hereinafter referred to as the 'disputed portion of the

property') was attached in compliance to the orders dated 16.5.2000

passed by the learned Single Judge. As would be noted hereafter, the

disputed portion of the property changed hands from one person to

other. After the attachment, Court had put the property to auction

and at that stage, the respondent No.2 filed the objections stating that

since he was the owner of the property and had nothing to do with the

said decree, the property could not be sold in the execution. The

learned Single Judge has accepted the objections of the respondent

No.2 and allowed his objections vide orders dated 12.3.2008 imposing

a cost of Rs.50,000/- upon the appellant/decree holder. In this appeal,

we are concerned with the validity and/or propriety of the aforesaid

orders passed by the learned Single Judge.

2. Few relevant facts, which would have bearing on the issued involved,

may now be noted. The appellant herein had awarded a contract to

the respondent No.1, M/s. Radiant Sports Management Pvt. Ltd.

(hereinafter referred to as the 'JD No.1'). Since certain disputes arose,

as, according to the appellant, JD No.1 had to make certain payments,

it invoked arbitration clause in the agreement between the parties.

The matter was referred to the learned Arbitrator, who gave the Award

in favour of the appellant herein as per which, the JD No.1 was to pay a

sum of Rs.13,50,000/- along with interest @ 15% per annum. This

Award was made rule of the Court and decree followed in terms of the

Award as no objections were filed by any of the parties. This decree

was not challenged any further and therefore, attained finality.

3. On the basis of the said decree, the appellant filed aforesaid Execution

Petition no.38/2000. The appellant wanted attachment of certain

properties in which it included property bearing No. S-524, Greater

Kailash-I, New Delhi alleging that the said property was in the name of

JD No.1. The Court passed orders dated 16.5.2000 attaching the

aforesaid property. JD No.1, as is evident from its name, is a private

limited company. One Mr. Aushim Khetrapal is its Managing Director.

At the time when the attachment order was passed, Mr.Khetrapal was

residing in the disputed portion of the aforesaid property, which was in

his occupation as a tenant. Other portions/flats in the said property

are occupied by different persons and Mr.Khetrapal had no connection

with those persons. Thus, at the time of execution of the warrants of

attachment the Bailiff attached only the disputed portion of the

property, which was in occupation of the Managing Director of the JD

No.1, namely, Mr.Aushim Khetrapal.

4. After the service of notice in the execution petition and the execution

of the warrants of attachment, Mr.Khetrapal appeared in the Court

and gave assurances to the Court to the effect that he would liquidate

the entire liability under the said decree by making payments in phased

manner. Significantly, no objections were filed by him stating that he

was only a tenant and was not the owner of the property. It would

also be pertinent to mention that later on vide sale deed dated

4.1.2001 he (Aushim Khetrapal) purchased the property from the

erstwhile owner jointly with his wife Mrs. Anita Khetrapal. Even after

purchasing the said second floor of the property in his name he never

raised any objection on the ground that such a property could not have

been attached as the decree was against a private limited company,

which was separate legal entity. Instead, as pointed out above, he kept

on giving promises to the Court that he would make the entire

payment, which is clear from the following:-

5. On 27.9.2002 application under Section 151 of the Code of Civil

Procedure on behalf of the judgment debtor was field supported by

affidavit of Mr.Aushim Khetrapal as the Managing Director of the

judgment debtor. In this application it was stated that the judgment

debtor wanted to settle the matter with the decree holder and it was

agreed between the parties that the judgment debtor would pay a sum

of Rs.11 lakhs in full and final settlement, which offer was accepted by

the decree holder as well. He gave two pay orders in the sum of

Rs.1,54,000/- and Rs.1,44,000/- both dated 26.9.2002. He also handed

over four post-dated cheques of Rs.2,00,000/- each. It was also

mentioned in this application that those cheques would be honoured

on presentation and if the cheques are dishonoured, entire decretal

amount of Rs.23,88,565/- along with interest @ 15% per annum from

10.2.2000 till payment would become due and payable. In para 9 of

the application, following stipulation was made:-

"9. That the judgment debtor further agrees and admits that till the entire payment in terms of the settlement above is pad to the decree holder he shall not sell, alienate, transfer or part with possession of the premises bearing No.S- 524, Greater Kailash-I, New Delhi and till payment of the last installment upto 10/10/02."

6. In his supporting affidavit Mr.Khetrapal, in addition to stating that he

was the Managing Director of the judgment debtor, specifically

affirmed on oath as under:-

"3. That I shall remain bound by the terms as stated in the accompanying application and in case of default shall also be personally liable to satisfy the decree."

Thus, he accepted that in case of default he would be

personally liable to satisfy the decree.

7. All the four cheques given by the judgment debtor to the decree holder

bounced and therefore, entire payment as per the decree after

adjusting Rs.3,00,000/-, which were paid by means of pay orders,

became due. In these circumstances, the Court passed the orders for

sale of the aforesaid attached property.

8. When the proclamation of the sale was issued, the respondent No.2

approached the Court and raised objections stating that he was the

bona fide purchaser of the disputed portion of the property and

therefore, it could not be put to auction. We may only note that the

auction was carried out as scheduled and bid of one Mr.Rajinder Singh

Verma for Rs.35,60,000/- was accepted. Matter was taken up by the

respondent No.2 to the Division Bench, but it would not be necessary

to spell out the proceedings. Suffice it to state that ultimately the

objections of the respondent No.2 were heard and decided in his

favour vide impugned orders dated 12.3.2008 holding that the said

auction of the property as illegal and allowing the auction purchaser to

withdraw the amount deposited by him along with interest paid on it.

9. Perusal of the order of the learned Single Judge would disclose that

after the purchase of the property vide sale deed dated 4.1.2001

Mr.Khetrapal had sold this property to one Mr.Rahul Mullick vide sale

deed dated 1.1.2002 and the respondent No.2 purchased the property

in question from Mr.Rahul Mullick vide sale deed dated 19.12.2003.

On this basis the learned Single Judge opined that the respondent No.2

was the bona fide purchaser of the property. It is also held by the

learned Single Judge that since the decree is against the respondent

No.1, which is a private limited company and thus, a distinct entity,

there could not have been an attachment of the property, which was

sold to Mr.Aushim Khetrapal and his wife Mrs.Anita Khetrapal on

4.1.2001. The learned Single Judge also held that in the facts of this

case the doctrine of "lifting of corporate veil" would not apply. On this

premise the conclusion arrived at by the learned Single Judge is that

since the property did not belong to the judgment debtor, such a

property could not have been sold in the execution.

10.We have heard the learned counsel for the parties at length and are of

the view that the conclusion arrived at by the learned Single Judge is

not correct in law as well as on facts. Few salient features of this case,

which would become discernible and apparent from the facts narrated

above, are the following:-

a) Mr.Aushim Khetrapal was occupying the disputed portion of

the property at the time when order of attachment dated

16.5.2000 was passed. No doubt, at that time he was only a

tenant. However, this property was purchased in the joint

names of Mr.Aushim Khetrapal and his wife on 4.1.2001 and

therefore, he became co-owner of the said property on

4.1.2001. Thus, even when the order of attachment dated

16.5.2000 was irregular, it came to be regularized on

4.1.2001.

b) What is important is that he never raised any objection after

the execution of the warrants of attachment that the

property could not be attached as he and his wife were the

owners of the said property whereas the judgment debtor

was a company, namely, distinct legal entity.

c) His conduct, on the contrary, depicts otherwise. Not only he

assured on behalf of the company as its Managing Director to

make the payment for which purpose he negotiated with the

decree holder and extracted huge concession inasmuch as

though the amount payable under the decree was more than

Rs.23 lakhs, the decree holder agreed to settle the case by

accepting only Rs.11 lakhs.

d) Furthermore, another aspect which becomes significant and

rather a clincher is that at the time of entering into

settlement he assured the decree holder as well as the Court

in his application dated 27.9.2002 the following two things:-

(i) till the entire payment in terms of the settlement is

paid to the decree holder, he shall not sell, alienate,

transfer or part with possession of the suit property

(which was lying under attachment);

(ii) he agreed, in no uncertain terms, that in case of

default he shall also be personally liable to satisfy

the decree.

e) It is clear that the decree holder acted upon the aforesaid

assurances of Mr.Aushim Khetrapal and even the Court

proceeded on the same basis because of which he could, for

the time being, defer the consequences of attachment of the

said property. It is also clear from the above that he virtually

agreed that the aforesaid property would be available for

satisfying the decree, in case of default and it is because of

this reason that not only he agreed to be personally liable,

but also not to sell, alienate, transfer or part with possession

of the suit property.

11.These material facts, which would be decisive, have not been taken

into account at all by the learned Single Judge while passing the

impugned order. It is stated at the cost of repetition that the property

was lying attached at that time and because of the aforesaid reasons,

particularly when there was no objection to the attachment orders and

Mr.Khetrapal himself offered the said property as security, the

attachment would be valid. Furthermore, when there was such an

attachment order, which was not under challenge on any ground

whatsoever at that particular time, it was not open to Mr.Khetrapal to

sell that property. Not only he violated the terms of the agreement,

such a sale would be contrary to law as the property was under court

attachment. Therefore, sale of the property by Mr.Khetrapal and his

wife to Mr.Rahul Mullick and further by Mr.Rahul Mullick to the

respondent No.2 would be of no consequence.

12.For these very reasons and particularly when Mr.Khetrapal had agreed

that he would be personally liable to satisfy the decree, it is not even

necessary to dwell into this issue whether in the facts of this case the

corporate veil could be lifted. Still, we may hasten to add that it is not

in dispute that the judgment debtor is a private limited company of

which Mr.Aushim Khetrapal is the Managing Director. It appears to be

a closely held company and it would even be possible to state that it is

in the nature of "quasi partnership", more particularly when we

observe the manner in which Mr.Khetrapal acted and did not react to

the attachment of the property. However, in the absence of exact

shareholding or the extent of shareholding of Mr.Khetrapal or other

members of his family, if any, we refrain from making any authoritative

comments on this aspect.

13.We are, thus, of the view that even if the respondent No.2 is a bona

fide purchaser (though even this is disputed by the learned senior

counsel for the appellant as the appellant's contention is that to avoid

payment of decretal amount, the aforesaid transactions are entered

into, which are allegedly sham), it is Mr.Aushim Khetrapal who

suppressed the aforesaid facts and sold the property to Mr.Rahul

Mullick, who in turn sold it to the respondent No.2. Therefore, the

respondent No.2 or his predecessor-in-interest (Mr. Rahul Mullick) are

duped by Mr.Aushim Khetrapal, which cannot affect the interest of the

decree holder adversely.

14.We are, thus, of the view that for satisfaction of the decree in favour of

the appellant, property in question can be put to auction. Accordingly,

we allow this appeal, aside the order dated 12.3.2008 and dismiss the

objections of the respondent No.2.

15.Since the earlier auction purchaser has already withdrawn the amount

deposited by this Court, the trial court shall issue fresh proclamation of

sale of the property in question and proceed further from that stage.

Matter shall be listed before the learned Single Judge for this purpose

on 8.12.2008.

                                                          (A.K. SIKRI)
                                                            JUDGE



November 07, 2008                                    (MANMOHAN SINGH)
hp.                                                       JUDGE