M/S Murli Manohar Leasing & ... vs M/S Intraport (India) Ltd And Shri ...
2009 Latest Caselaw 2717 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                   EA.No.352/2004 and Ex.No. 31/2004

%                                   Date of decision: 20.07.2009

M/S MURLI MANOHAR LEASING
& FINANCE CO.PVT LTD                           .... Decree Holder
                           Through: Mr. Yogesh Malhotra, Advocate

                                   Versus

M/S INTRAPORT (INDIA) LTD                      .... Judgment Debtor
AND

1)    SHRI TILAK RAJ SHARMA                    ..... Objector
2)    SMT REKHA SHARMA                         ..... Objector
                           Through: None for the judgment debtor
                                    Mr Kamal Mehta, Advocate for the
                                    Objectors.

CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?       Yes

2.    To be referred to the reporter or not?      Yes

3.    Whether the judgment should be reported
      in the Digest?                                    Yes


RAJIV SAHAI ENDLAW, J.

EA.No.352/2004

1. Objections are filed on the ground that the property of the

judgment debtors by attachment and sale whereof the money decree

is sought to be executed, stood sold by agreement to sell, power of

attorney, Will coupled with delivery of possession and payment of

entire sale consideration, much prior to the filing of the execution.

2. Execution is sought of an arbitral award dated 17th September,

2003 having force of a decree under Section 36 of the Arbitration

Act, 1996. The said award is stated to be for payment of Rs

61,11,290.32 as on date of filing of the execution, with future

interest, by the judgment debtor to the decree holder. It is, inter

alia, the plea of the decree holder in the execution petition that the

judgment debtor as owner of property No. A-1, Mangol Puri

Industrial Area, Phase-II had agreed to sell the same to the decree

holder vide agreement to sell dated 30th August, 1996 for a sum of Rs

1,25,00,000/; that the decree holder had paid a sum of Rs 25 lacs to

the judgment debtor at the time of signing of the agreement to sell;

that the property agreed to be sold was at the time of agreement to

sell mortgaged with Vysya Bank Limited and the judgment debtor

had agreed to free the property from the mortgage and complete the

sale within 90 days from the agreement to sell; that it was further

agreed that if the judgment debtor is not able to, within the said

time, have the property freed from mortgage, the agreement shall

stand cancelled and the judgment debtor shall return the monies

received from the decree holder together with interest at 18% per

annum; that the judgment debtor was unable to have the property

freed from mortgage within the stipulated period and the decree

holder accordingly demanded refund of monies paid with agreed rate

of interest and upon default of the judgment debtor, initiated

arbitration as per the clause to that effect in the agreement; the

arbitral tribunal accordingly awarded Rs 25 lacs to the decree holder

against the judgment debtor together with interest at 18% per

annum, costs, future interest etc.

3. It is further the case of the decree holder in the execution

petition that judgment debtor has no other property except the

property earlier agreed to be sold to the decree holder, and from

which the decree could be satisfied and as such assistance of the

court in execution was sought by attachment and sale of the

aforesaid property.

4. At this stage it may also be mentioned that OMP.No. 6/2004

was preferred inter alia by the judgment debtor under Section 34 of

the Act with respect to the aforesaid award which was dismissed on

13th January, 2004. The execution petition was filed on 1 st March,

2004.

5. Though this court, did not issue any warrants of attachment of

the property aforesaid and merely issued notice of the execution to

the judgment debtor but EA.No.352/2004 has been filed by the

objectors under Order 21 Rule 58 objecting to the relief claimed by

the decree holder of execution of the money decree by attachment

and sale of the property aforesaid. It is now settled law that such

objection is maintainable even without the property being attached

or sold in execution.

6. It is inter alia the case of the objectors that they are the bona

fide purchasers of the aforesaid property from the judgment debtor.

The objectors have in this regard alongwith their objections filed

photocopies of:

i. an agreement to sell dated 25th February, 1999 executed by

the judgment debtor in favour of the objectors with respect to

the aforesaid property for a total sale consideration of Rs. 30

lacs. In the said agreement the judgment debtor has

acknowledged receipt of entire sale consideration from the

objectors. It is also a term of the said agreement that the

possession of the property together with all title documents

with respect thereto had been delivered by the judgment

debtor to the objectors at the time of execution of the

agreement and the judgment debtor shall thereafter have no

right, title or interest in the property and the agreement is

irrevocable that the judgment debtor shall cooperate in all

formalities for transfer of the said property in favour of the

objectors;

ii. a general power of attorney registered on 25th February, 1999,

by the director of the judgment debtor in favour of the

objectors with respect to the aforesaid property, also

authorizing the objectors to sell, mortgage, transfer the said

property;

iii. a Will registered on 25th February, 1999 executed by the

director of the judgment debtor who has executed the

agreement to sell and power of attorney aforesaid, though in

his personal capacity, but with respect to the aforesaid

property in favour of the objectors;

iv. the telephone bills w.e.f. June, 1999 of the telephone

connection in the name of the objectors at the address of

aforesaid property;

v. the electricity bills in the name of the objectors of the year

2004 at the address of the aforesaid property;

vi. a receipt of payment to MCD with respect to the said

property;

vii. letter dated 13th February, 2003 of the MCD mutating the

aforesaid property in the name of the objectors on the basis of

their application dated 30th December, 2002.

The objectors thus contend that the property aforesaid being of the

objectors w.e.f. 25th February, 1999 cannot be attached or sold in

execution of a money decree against the judgment debtor.

7. It is further the case of the objectors that the decree holder

had filed OMP 390/2003 in this court for restraining the judgment

debtor from selling, transferring or alienating the said property; that

vide order dated 30th September, 2003 this court was pleased to

restrain the judgment debtor from alienating, encumbering or selling

the property; the said order was affixed on the property and

wherefrom the objectors learnt of the same and filed an application

in this court in the aforesaid OMP and served copy thereof on the

counsel for the decree holder, informing of the sale aforesaid of the

property by the judgment debtor to them much prior to the order

dated 30th September, 2003. It is the case of the objectors that the

decree holder inspite of knowledge of same, still applied for

execution of the award by sale of the property, without informing

this court of the claim aforesaid of the objectors.

8. The decree holder has filed reply to the objections aforesaid

contending that the agreement to sell is bogus and frivolous; that

the title in the property cannot be transferred on the basis of

agreement to sell and power of attorney and continues to vest with

the judgment debtor; that there is no legal transfer of the property

of the judgment debtor to the objectors. It is further contended that

the application of the objectors for impleadment in

OMP.No.390/2003 was never allowed and the said OMP was

subsequently dismissed as withdrawn in view of the ad interim order

dated 14th February, 2005 in this execution, after the objectors had

appeared, restraining the objectors from selling, mortgaging or

transferring the property.

9. I had, during the hearing inquired from the counsel for the

decree holder whether the decree holder disputes and controverts

the registration of the power of attorney and Will aforesaid;

inasmuch as it was felt that if that be the case, the matter will have

to be put to evidence to adjudicate the objections. The counsel for

the decree holder has informed that the registration is not disputed.

He has confined his submissions only to, as pleaded in reply to the

objections of there being no legal transfer of the property by the

judgment debtor in favour of the objectors on the basis of the

documents filed and thus execution against the said property being

maintainable.

10. The aforesaid contention of the decree holder need not detain

the disposal of these objections any longer, the matter being no

longer res integra. The Division Bench of this court in Asha M Jain

Vs Canara Bank 94(2001) DLT 841 negatived similar contentions of

there being no transfer within the meaning of Section 54 of the

Transfer of Property Act and held that a contract for consideration

duly signed and in pursuance to which possession is taken in part

performance and full consideration paid apart from execution of

collateral documents viz power of attorney, Will etc, amounts to

transfer of the property and the only right which can be attached by

holder of money decree, with respect to the said property, is the

right, if any, remaining of the transferor. Since, in such transaction

no right of the transferor remains, the order of attachment in that

case effected by the Single Judge and was revoked by the Division

Bench. The agreement to sell in present case is of prior to the date

when registration of such agreements became compulsory. Further

from registration of power of attorney and the Will, it cannot be said

that the documents have been back dated.

11. The counsel for decree holder has under list dated 18th July,

2009 filed copies of following judgments in support of his contention

of the judgment debtor continuing to be the owner of the property.

i) Narandas Karsondas Vs S.A. Kamtam AIR 1977 SC 774

laying down that in India there is no distinction between

legal and equitable property, as in English law and that an

agreement of sale not creating any interest in immovable

property;

ii) Imtiaz Ali Vs Nasim Ahmed AIR 1987 Delhi 36 again

holding that there can be no ownership on basis of

agreement to sell;

iii) Patel Natwarlal Rupji Vs Shri Kondh Group Kheti

Vishayak (1996) 7 SCC 690 on the same proposition.

However, the Division Bench in the judgment (supra) having

dealt with the proposition in all the judgments aforesaid, no different

view can be taken by this court.

12. That being the legal position, there is no option but to hold in

the present case also that the decree holder is not entitled to

execution of the money decree by attachment and sale of immovable

property which had been transferred by the judgment debtor in the

manner aforesaid to the objectors. It may also be noted that, during

the course of hearing, it was not disputed that the arbitration

proceedings had commenced on 22nd February, 1999 and prior to the

order dated 30th September, 2003 aforesaid there was no restrain

whatsoever on the judgment debtor selling, alienating or dealing

with the property. As noticed above, the property was sold in the

manner aforesaid on 25th February, 1999 i.e. within three days of the

commencement of the arbitration proceedings, the award wherein is

sought to be executed as a decree.

13. The counsel for the decree holder next sought to contend that

the sale transaction by the judgment debtor in favour of the

objectors was fraudulent; it was urged that while the price at which

the same property had been agreed to be sold to the decree holder in

1996 was Rs 1,25,00,000/- while sale to the objectors is shown to be

of Rs 30 lacs only. Though on inquiry it was stated that no document

has been filed by the decree holder to show that the price of the

property in 1999 was more than Rs 30 lacs; counsel has contended

that it is unbelievable that the price would depreciate to that extent

and judicial notice can be taken of the overall increase in prices.

Reliance in this regard is sought to be placed on DDA Vs Skiper

Construction Co (P) Ltd (1996) 4 SCC 622. It was contended that

this court ought not to permit such fraudulent transaction in

concealment of price to come in the way of execution of decree and

recovery of just dues.

14. In this case the need for considering the aforesaid submissions

of the counsel for the decree holder does not arise inasmuch as there

is absolutely no basis therefor.

15. It stands established that the decree holder, prior to filing of

execution was aware of the claim of the objectors. The decree

holder still chose not to make even a whisper of the same in the

execution petition. If the decree holder felt that the transaction was

fraudulent, the pleadings with respect thereto, as specifically

required to be made, ought to have been made. Not only so, in reply

to the objections also, no such plea has been taken. The decree

holder rested his case, perhaps in ignorance of the dicta aforesaid of

the Division Bench and of other courts, on there being no legal

transfer of the property. The decree holder cannot be permitted to

make averments as serious as of fraud without any pleading

whatsoever.

16. Be that as it may, since fraud is alleged merely on the basis of

reduced price, it may be stated that it is inter alia a term of the

agreement to sell by the judgment debtor in favour of the objectors

that all kinds of dealing with respect to the property shall be

completed by the objectors themselves with the concerned

authorities in respect of the said property and all levies, dues, taxes,

outgoings un-increased amounts, lease money etc demand of DDA

with respect to the said property shall be borne by the objectors. It is

quite possible that there were huge liabilities on this account and in

consideration of the objectors undertaking the same the price was

fixed at Rs 30 lacs. Though the decree holder has not placed before

this court the agreement to sell earlier executed by the judgment

debtor in favour of the decree holder, for Rs 1.25 crores but from the

narration thereof in the execution petition and in the award it

transpires that under the said agreement the unearned increase and

DDA levies etc were payable by judgment debtor itself. This is

indicated just to show that mere difference in price does not find

favour with me to start a roving and fishing inquiry or to continue

depriving the objectors of the use/benefits of their valuable property.

17. The judgment cited, in Skiper Construction Co (P) Ltd

(supra) is not relevant for present purposes. The counsel for the

decree holder in list dated 18th July, 2009 (supra) also relied upon

the following judgments on aspect of fraud:

i) Manmath Nath Chakravarty Vs Sachindra Kumar

Chakravarty AIR 1956 Cal 59 (DB) holding that if the execution

creditors knew of the real value and yet understated the value, it

would be evidence of fraud and vitiate the sale inspite of objection

having not been taken by the judgment debtor.

However, the said case was under Order 21 Rule 90 CPC i.e. sale in

execution of decree and not relevant for present purpose.

ii) Sobhan Khan Vs Gangadhar Senapati AIR 1944 Patna 40

This judgment was also with respect to Order 21 Rule 90 CPC

and in that context disparity between value stated in sale

proclamation and real value was held sufficient to infer fraud.

iii. Mahesh Chand Sharma Vs Jaswant Rai Hora 2002 (4) AD

(Delhi) 334

This was a case of objections to attachment of property in

execution. This judgment of Single Judge is of a date shortly after

the judgment of Division Bench in Asha M Jain and does not

consider the same. The judgment of Division Bench is binding.

Moreover in this case, no consideration was mentioned in agreement

to sell and which led the court to hold the same to be suspicious.

iv) Formosa Plastic Corporation Ltd Vs Ashok Chauhan

76 (1998) DLT 817 where in para 45 it has been held whether

sale/transfer is fictitious or not can be decided only after evidence.

However, in the present case, there is no plea of transfer being

fictitious. Evidence can be led on pleadings only and in the absence

of any such case having been set up by decree holder inspite of

notice of claim of objectors, since prior to filing execution, no issue

arises and no trial required;

v) Nedungadi Bank Ltd Vs Ezhimala Agricultural Products

AIR 2004 Kerala 62, to the effect that fraud is too unholy a thing to

be condoned and courts will be justified in coming down heavily on

perpetrators of same when the same is noticed in judicial

proceedings.

Order VI Rule 4 CPC (which would be applicable, the

procedure for disposal of objections being same as that of a suit)

requires a party relying on any fraud, to plead particulars with dates

and items. Nothing of the sort has been done herein, inspite of

knowledge as aforesaid of decree holder of transfer claimed by

objectors. It is not the case that the transfer is make belief or the

property remains in control of the judgment debtor or that the

objectors and the judgment debtor company/its directors are closely

related to each other in any manner whatsoever. As aforesaid,

transfer is of a date within three days of commencement of arbitral

proceedings. There is no law prohibiting a person against whom

money claim is made before court or arbitrator, from transferring his

property. The lis was not with respect to the property. The decree

holder choose not to take any steps for restraining the judgment

debtor from transferring the property, till 30th September, 2003. In

the circumstances legal propositions argued in abstract without

laying any foundation therefor in pleadings or otherwise, do not

compel this court to direct parties in this case to trial.

Though the Companies Act in Section 531 and Section 531A

thereof voids any transfer of property by a company, otherwise than

in ordinary course of business and in good faith and for valuable

consideration, made within six months or one year respectively

before presentation of petition for winding up, I do not find any such

power in the executing court. Section 53 of the Transfer of Property

Act empowers the court to, on a suit being filed, declare a transfer of

immovable property made with intent to defeat or delay creditors of

transferor, as void. However, no such suit has been filed in present

case.

18. Accordingly, EA.No.352/2004 is allowed. The order dated 14th

January, 2005 restraining the objectors from dealing with the

property is vacated. The parties are left to bear their own costs.

Ex.No.31/2004

19. That brings me to another argument of the counsel for the

decree holder, for execution of the decree against Shri Sanjay Kumar

Tandon and Shri Sunil Kumar Tandon the then directors of the

judgment debtor company. Even though the arbitral award sought

to be executed as a decree was not against the said Shri Sanjay

Kumar Tandon and Shri Sunil Kumar Tandon but the decree holder

filed execution impleading them also as judgment debtors. No

permission from the court was taken in that regard. In these

circumstances, vide order dated 15th July, 2009, the names of the

said Shri Sanjay Kumar Tandon and Shri Sunil Kumar Tandon were

struck off from the array of judgment debtors in the execution

petition, reserving the right of the decree holder to proceed against

them if succeeds in establishing a case of fraud and of being entitled

to execute the decree against them.

20. The counsel for the decree holder besides relying upon the

judgments (supra), has in this regard in the list dated 18 th July, 2009

(supra) also relied upon Saurabh Exports Vs Blaze Finlease and

Credits Pvt Ltd 129 (2006) DLT 429. That was a suit for recovery

of money. The plaintiff therein had lent the money to a private

limited company. On default in repayment, the suit was filed for

recovery of money not only against the company but also against its

directors. This court held that on the pleadings and the evidence led

the principles laid down in Singer India Ltd Vs Chander Mohan

Chadha (2004) 7 SCC 1 for lifting the corporate veil were satisfied.

The Supreme Court in Singer India Limited held that when the

corporate personality is being blatantly used as a cloak for fraud or

improper conduct or where the protection of public interest is of

paramount importance or where the company has been formed but

evade obligations imposed by law, the court will disregard the

corporate veil. This court in Saurabh Exports, on pleadings and

evidence recorded, found that the company was a front for the

business of its directors and thus the money decree was passed not

only against the company but its directors also.

21. The counsel for the decree holder has also relied upon

Ravinder Kaur Vs Ashok Kumar (2003) 8 SCC 289 where it has

been held that courts of law should be careful enough to see

through diabolical plans of the judgment debtors to deny the decree

holders the fruits front of the decree obtained by them. This was not

a case of money recovery but an eviction decree. The tenant in that

case inspite of giving undertaking to vacate the premises did not do

so. On execution being filed, objections were raised with respect to

the identity of the property. It was in that context that the

observations aforesaid were made. In my view the same would not

be relevant for the present purposes.

22. The execution petition in the present case does not make out

any case whatsoever for execution of the decree against Shri Sanjay

Kumar Tandon and Shri Sunil Kumar Tandon aforesaid. As such

there is nothing for this court to hold that the judgment debtor

company was used by the Tandons merely as cloak to receive money

from the decree holder or to avoid payment thereof. It is not the

case that the judgment debtor company had no business or was

merely a front. On the contrary the case is that the judgment debtor

was the owner of a valuable immovable property which the decree

holder had agreed to buy.

23. It is necessary to reiterate that it cannot be laid down as a

general proposition that whenever the decree is against a company,

its directors/shareholder would also be liable. To hold so would be

contrary to the very concept of limited liability and obliterate the

distinction between a partnership and a company. The courts have,

however, watered down the principles laid down in Solomon Vs

Solomon & Company Ltd 1897 AC 22 by the House of Lords of the

company, in law being a different person all together from its

shareholders and directors and of the said shareholders and

directors being not liable for the debts of the company except to the

extent permitted by law, to cover the cases of fraud, improper

conduct etc as laid down in Singer India Ltd (supra). However, in

the absence of any pleadings to that effect, in the present case it

cannot be said that the Tandons on account of being the directors of

the company are liable for the money debts of the company.

24. Thus, it is held that no case for lifting of the corporate veil of

the judgment debtor company is also made out in the present case.

RAJIV SAHAI ENDLAW (JUDGE) July 20, 2009 M