Delhi High Court

Reliance Industries Ltd. vs Vijay Cable Industries & Ors on 7 May, 2014

Author: Rajiv Sahai Endlaw

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                   Date of decision: 7th May, 2014.

+                               CS(OS) 1112/1998

       RELIANCE INDUSTRIES LTD.                   ..... Plaintiff
                   Through: Mr. B.B. Sawhney, Sr. Adv. with Mr.
                            Vishnu Sharma and Mr. Lakshay
                            Sawhney, Advs.

                                          Versus

       VIJAY CABLE INDUSTRIES & ORS              ..... Defendants
                    Through: Mr. Rajesh Banati, Adv. for D-1&2
                             Mr. A.K. Singh, Mr. Arun Kr.
                             Panwar and Ms. Geentajali Khanna,
                             Advs. for UPFC.

                                           AND

+                                      EX.P. 126/1997

       SOM DUTT ENTERPRISES LIMITED          .... Decree Holder
                   Through: Mr. B.B. Sawhney, Sr. Adv. with Mr.
                            Vishnu Sharma and Mr. Lakshay
                            Sawhney, Advs.

                                          Versus

       VIJAY CABLE INDUSTRIES & ORS      ..... Judgement Debtors
                    Through: Mr. Rajesh Banati, Adv. for D-1&2
                             Mr. A.K. Singh, Mr. Arun Kr.
                             Panwar and Ms. Geentajali Khanna,
                             Advs. for UPFC.
                                           AND



CS(OS) 1112/1998, EX.P. 126/1997 & EX.P. 96/2008                      Page 1 of 19
 +      EX.P. 96/2008, EA No.189/2008, EA No.145/2014 (of UPFC u/O
       21 R-58), EA No.75/2014 (of the Judgment Debtor u/O 21 R-58)
       & EA No.34/2014 (of the decree holder u/S 151 CPC).

       NATIONAL SMALL INDUSTRIES
       CORPORATION LTD                      ..... Decree Holder
                   Through: Mr. Sanjay Sharma, Adv.

                                          Versus

    M/S VIJAY CABLE INDUSTRIES LTD.
    AND ORS                           ..... Judgement Debtors
                  Through: Mr. Rajesh Banati, Adv. for JD-1&2.
                           Mr. A.K. Singh, Mr. Arun Kr.
                           Panwar and Ms. Geentajali Khanna,
                           Advs. for UPFC.
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

I.As. No.7948/1998 (of plaintiff u/S 151 CPC), 11037/2007 (of UPFC for
vacation of order dated 14th September, 1998), 3952/2014 (of UPFC for
impleadment as party to the suit) & 6220/2014 (of plaintiff for
impleadment of UPFC as a party to this suit) in CS(OS) No.1112/1998

1.

The suit i.e. CS(OS) No.1112/1998 has been filed under Order 34 of

the Civil Procedure Code (CPC), 1908 for recovery of Rs.6,20,98,822.11

paise jointly and severally from the defendant No.1 M/s Vijay Cable

Industries, defendant No.2 Mr. Vijay Kumar Bhatia, defendant No.3 Mr.

Tilak Raj Bhatia, both partners of M/s Vijay Cable Industries as well as

from defendant No.4 Ms. Priya Bhatia wife of the defendant No.2 Mr. Vijay

Kumar Bhatia and defendant No.5 M/s Vijay Cables Ltd., by enforcement

of equitable mortgage of property No.A-111, New Friends Colony, New

Delhi and property No.37, Block-A, Phase-II, Noida, U.P., pleading:

(i) that as on 21st May, 1996, the defendant No.1 of which the

defendants No.2&3 were partners owed the principal sum of

Rs.3,23,75,000/- to the plaintiff towards price of goods sold, supplied

and delivered by the plaintiff to the defendants No.1 to 3 and which

amount the defendants No.1 to 3 were unable to pay;

(ii) that the defendants No.1 to 3, to be able to continue making the

purchases from the plaintiff, agreed to create charge and/or mortgage

over their properties aforesaid and also offered the personal

guarantees of the defendants No.2 & 4 and which was agreed to by

the plaintiff;

(iii) that the defendants No.2 & 4 created equitable

mortgage/charge over property No.A-111, New Friends Colony, New

Delhi by depositing title deeds thereof with the plaintiff; similarly,

the defendant No.5 created mortgage of the property aforesaid at

Noida, U.P.;

(iv) that the defendants were however unable to pay their dues and

which at the time of institution of the suit stood at Rs.6,20,98,822.11

paise.

2. Summons of the suit were issued and vide ad-interim ex-parte order

dated 28th May, 1998, the defendants were restrained from alienating,

transferring or creating third party interest in the two properties aforesaid.

3. The plaintiff filed I.A. No.7948/1998 under Section 151 CPC

pleading that the Uttar Pradesh Financial Corporation (UPFC) had issued

public notice/advertisement in the newspaper dated 4 th September, 1998

inviting offers for sale (under Section 29 of the State Financial Corporations

Act, 1951) inter alia of the property No.A-111, New Friends Colony, New

Delhi claiming the said property to be lying with UPFC as collateral

security and contending that since the original title documents of the said

property were lying with the plaintiff, the said property could not be lying as

collateral security with the UPFC and seeking to restrain the UPFC from

selling, alienating, transferring or creating any third party interest in the said

New Friends Colony property.

4. I.A. No.7948/1998 came up before this Court first on 14th September,

1998 when notice thereof was issued and UPFC was in the meanwhile,

restrained from selling, alienating, transferring or creating third party

interest in the said New Friends Colony property.

5. UPFC filed a reply to the application contending, (a) that the

documents filed by the plaintiff of creation of equitable mortgage of the

New Friends Colony property in favour of the plaintiff were not the title

documents of the said property; (b) that as on 21 st May, 1996, when the

plaintiff claimed equitable mortgage to have been created, the defendants

had no right, title or interest to create equitable mortgage of the property in

favour of the plaintiff; (c) that the defendant No.1 and M/s Priya Cable (P)

Ltd. had availed loan facility from the UPFC in the sums of Rs.90 lakhs,

Rs.90 lakhs and Rs.50 lakhs and to secure the repayment of the aforesaid

loans, had deposited the original Conveyance Deed dated 24th October, 1996

of the New Friends Colony property with the UPFC; (d) that the sum of

Rs.1,19,66,952.18 paise was due from defendant No.1 M/s Vijay Cable

Industries and a sum of Rs.1,90,47,035.02 paise was due from M/s Priya

Cable (P) Ltd. to UPFC and UPFC, in exercise of its rights under the State

Financial Corporations Act, had advertised for sale of the said property.

6. The suit continued to languish and the ex-parte restraint order dated

14th September, 1998 against the UPFC continued. A perusal of the order

sheet does not show any effort having been made on behalf of UPFC to

have the said stay order vacated.

7. On 11th July, 2005, the suit was dismissed for non-prosecution and

default; however application for restoration was filed and the suit was on

28th August, 2006 restored to its original position. Even in the interregnum

UPFC does not appear to have taken any step for sale of the property.

8. Ultimately, after nearly ten years, I.A. No.11037/2007 was filed by

UPFC seeking vacation of the ex-parte order dated 14th September, 1998,

contending that it was not even a party to the suit and that public dues were

held up owing to the ex-parte order dated 14th September, 1998; notice of

the said application was issued.

9. The plaintiff filed reply to I.A. No.11037/2007 contending that the

UPFC could not, after ten years, seek vacation of the ex-parte order dated

14th September, 1998, when no steps were taken earlier for vacation thereof.

10. The matter again continued to languish for nearly five years; the

orders dated 26th September, 2011, 5th January, 2012, 13th April, 2012 and

4th September, 2013 indicate that the defendants made a proposal for one

time settlement of the dues of UPFC but it was reported on 31 st October,

2013 that no settlement had been reached.

11. Strangely, UPFC then filed I.A. No.3952/2014 for impleadment as a

defendant in this suit and which application also is pending consideration.

12. The matter was listed before this Court on 27 th March, 2014 when it

was enquired from the senior counsel for the plaintiff as to how the plaintiff,

in this suit, to which UPFC was / is not a party, could seek interim order

against UPFC. It was also observed that UPFC, though had applied for

impleadment as a defendant but only on the ground of being affected by the

interim order dated 14th September, 1998 in the suit and if it were to be held

that the plaintiff could not have obtained interim order against a non-party

to the suit, the question of impleading UPFC as a party thereto would also

not arise. On request of the senior counsel for the plaintiff to prepare, the

matter was posted for 2nd April, 2014.

13. The plaintiff thereafter has filed I.A. No.6220/2014, also for

impleadment of UPFC as a party to the suit.

14. The senior counsel for the plaintiff and the counsel for the UPFC

have been heard.

15. To meet the observation of the Court on 27 th March, 2014 that no

interim order against a non-party to the suit could have been obtained, the

senior counsel for the plaintiff has relied on the judgment of the Division

Bench of this Court in Tax Recovery Officer XVI, New Delhi Vs. Punjab &

Sind Bank 161 (1986) ITR 220. In that case, a) the Punjab & Sind Bank

had filed a suit for recovery of the dues from its debtors who had also

created equitable mortgage of their property in favour of the Bank; b)

interim order restraining the defendants from alienating, encumbering or

parting with possession of the property was obtained; c) during the

pendency of the suit, the Income Tax Department published a notice for

auction of the same property in realization of the income tax dues of the

defendants. The Division Bench of this Court held that while the Bank was

a secured creditor, the Income Tax Department was an unsecured creditor

and thus the dues of the Bank would have priority over the income tax dues.

It was further held that since the security held by the Bank was in jeopardy,

the Court was entitled to, in exercise of powers under Section 151 of the

CPC, issue an injunction even against a person who is not a party to the suit

as otherwise the property vesting with the Bank would have been in

jeopardy and the Bank would have been denied justice. It was thus held that

Section 151 CPC can be invoked even against a third party.

16. The senior counsel for the plaintiff has also referred to Indian Bank

Vs. Ashoka Builders & Promoters MANU/DE/0337/1992, where a learned

Single Judge of this Court, following the judgment supra also held that an

injunction order can be issued under Section 151 CPC against a party who

may not be a party to the main suit.

17. The counsel for the UPFC has not been able to argue to the contrary.

18. Though I respectfully differ from the proposition, of it being open to

the Court to issue an interim order against a non-party to the suit, for the

reasons,

(i) that the interim orders are in aid of the final relief and when the

question of granting a final relief does not arise owing to such person

not being a party to the suit, no question of granting interim relief

against such party can arise;

(ii) Section 151 CPC enables the Court to make such orders as may

be necessary for the ends of justice or to prevent the abuse of the

process of the Court; however grant of an interim order against a

person, the dispute with whom is not for adjudication before the

Court, amounts to enabling the plaintiff/applicant to, without calling

upon the Court to adjudicate the dispute if any with a person and

without impleading that person, obtain interim order against him, is

an abuse of the process of the Court;

but the judgments aforesaid would bind me, unless found to

have been overruled / dissented from.

19. I have therefore examined the legal position. My research shows,

a) that the aforesaid judgments have not been referred to in any

subsequent judgments;

b) that a Division Bench of this Court in Bharat Petroleum

Corporation Limited Vs. Shri Hari Chand Sachdeva AIR 2001

Delhi 307, though without reference to the earlier judgments in

Punjab & Sind Bank and / or Ashoka Builders & Promoters, set

aside the interim order passed by the learned Single Judge inter alia

on the ground that the relief prayed for in the application (for interim

relief) was totally outside the scope of the suit and that no relief could

have been granted in favour of a party to the suit 'against a third

party';

c) a Division Bench of the Madras High Court also, in Basket

Ball Federation of India Vs. N.S. Ziauddeen, Tamil Nadu

Basketball Association MANU/TN/0263/2013 held that granting of

an order of injunction against a third party, without impleading it,

cannot be sustained in the eyes of law;

d) a Division Bench of the High Court of Kerala in Balakrishnan

Nair v. Mohammed Kunju MANU/KE/0127/1963 and the High

Court of Kerala in Varghese Vs. Fast Line Builders and Developers

Kerala Pvt. MANU/KE/1232/2013,

e) a Division Bench of the High Court of Madras in K.P.M.

Aboobucker Vs. K. Kunhamoo AIR 1958 Madras 287,

f) the High Court of Gujarat in Shahbuddin Ismailbhai

Ghaswala Vs. Keshavlal Lallubhai Tandel MANU/GJ/0250/1985,

and,

g) the High Court of Allahabad in L.D. Meston School Society

Vs. Kashi Nath Misra AIR 1951 Allahabad 558,

to have also held that no order of injunction can be passed to affect a

person who is not a party to the proceeding, observing that an interim

relief granted during the pendency of a suit, cannot be of greater

scope than what could be granted in the suit itself and thus the Court

has no jurisdiction to grant by way of interim relief what could never

be granted in the main suit itself;

h) a learned Single Judge of the Madras High Court in

Unnamalai Achi v. Umayal Achi MANU/TN/0569/1967, relying on

Manoharlal Chopra Vs. Rai Bahadur Rao Raja Seth Hiralal AIR

1962 SC 527 did hold that in suitable cases, injunction could be

issued under Section 151 CPC, though in the facts of that case,

refused to grant such injunction;

i) as far as the power of the Court to grant injunction outside

Order XXXIX Rules 1&2 CPC is concerned, the same has been put

beyond a pale of controversy in Tanusree Basu Vs. Ishani Prasad

Basu (2008) 4 SCC 791 where it has been held that Order XXXIX

Rules 1&2 CPC are not the sole repository of the power of the Court

to grant injunction and Section 151 CPC empowers the Court to grant

injunction, if matter is not covered by Rules 1&2 of Order XXXIX;

however, the occasion for considering the grant of injunction against

a non-party to a suit did not fall for consideration therein.

20. The law therefore is found to be, that while injunctions outside Order

XXXIX Rules 1&2 CPC can be granted in exercise of inherent powers of

the Court under Section 151 CPC, there is no dicta, at least of the Supreme

Court on the aspect, whether even under Section 151 CPC, injunction can be

issued against a non-party to the suit. The views of the High Courts have

been noticed above.

21. However, even if interim injunction against a non-party to a suit can

be given, the same does not imply that such injunction is to be granted at the

mere asking. It still remains to be adjudicated, whether this is a fit case for

grant of interim injunction, even against a non-party, and on which aspect

also arguments were heard on 2nd April, 2014.

22. As far as the merits of the injunction are concerned, I am of the view

that no case for granting interim injunction restraining the UPFC from

proceeding with the sale of the subject property in exercise of powers under

Section 29 of the State Financial Corporations Act is made out, for the

following reasons:

(I) There is no challenge in the present suit to the right of the

UPFC to sell the property.

(II) As far back as on 4th September, 1998, upon public notices of

sale being issued by the UPFC in the newspaper, the plaintiff became

aware of the claim of the UPFC to the said property and of the right

asserted by the UPFC to sell the same and though the plaintiff applied

for and obtained injunction restraining UPFC from so selling the

property but the plaintiff till now i.e. for nearly 16 years has not made

any such challenge, neither in this suit by seeking amendment thereof

nor by filing any other proceeding. In fact, no steps for impleading

UPFC as a party to this suit also were taken till this Court during the

hearing on 27th March, 2014 expressed doubts about the right of the

plaintiff to sustain interim injunction against UPFC without the UPFC

being a party to the suit.

(III) Even now, no application for amendment of the plaint to

challenge such right/claim asserted by the UPFC has been sought.

(IV) The right even if any of the plaintiff to challenge the claim of the

UPFC may now also be barred by time; however, no final opinion

thereon can be expressed without the plaintiff even making such a

challenge.

(V) Though UPFC also has filed a misconceived application for

impleadment as a party to this suit but only for the purpose of having

the stay order dated 14th September, 1998 vacated; the same thus does

not compel me to take a different view.

(VI) When in the circumstances aforesaid, it does not fall for

adjudication in this suit, whether UPFC is entitled to sell the property

or not, this Court cannot continue any further the interim injunction

restraining the UPFC from selling the said property; any continuance

of the said interim order would amount to this Court injuncting during

the pendency of the proceedings, what it is not called upon to injunct

on the culmination of the said proceedings and which in my view is

clearly impermissible in law.

(VII) What has emerged during the hearing is that the defendant

No.2 Mr. Vijay Kumar Bhatia and the defendant No.4 Ms. Priya

Bhatia acquired the New Friends Colony property vide General

Power of Attorney and Special Power of Attorney dated 5 th April,

1996 in favour of the defendant No.4 Ms. Priya Bhatia and

Agreement to Sell in favour of the defendant No.2 Mr. Vijay Kumar

Bhatia and upon introduction of the scheme for conversion of

leasehold rights in the land underneath the property into freehold, got

executed a Conveyance Deed of freehold rights dated 24th October,

1996 executed in favour of the defendant No.4 Ms. Priya Bhatia.

(VIII) Mortgage by deposit of title deeds was purported to be created

in favour of the plaintiff by depositing with the plaintiff, the

Agreement to Sell and the Power of Attorney in favour of the

defendants No.2&4 and mortgage by deposit of title deeds is

purported to be created in favour of UPFC by deposit of the

Conveyance Deed dated 24th October, 1996.

(IX) Though the counsels have addressed lengthy arguments on the

aspect, whether there can be said to be any mortgage in favour of the

plaintiff in the said state of affairs.

A. with the counsel for the plaintiff relying on:

(a) Amulya Gopal Majumdar Vs. United Industrial Bank

Ltd. AIR 1981 Calcutta 404 (DB); Angu Pillai Vs. M.S.M.

Kasiviswanathan Chettiar AIR 1974 Madras 16 (DB); Miss

J.J. Villa Vs. C.A. Petley AIR 1934 Rangoon 51; and,

Syndicate Bank Vs. Estate Officer & Manager, APIIC Ltd.

(2007) 8 SCC 361, in support of the contention that equitable

mortgage can be created by deposit of Agreement to Sell,

possession memo etc.;

(b) Rachpal Vs. Bhagwandas AIR 1950 SC 272, Deb Dutt

Seal Vs. Raman Lal Phumra AIR 1970 SC 659, United Bank

of India Ltd. Vs. Messrs Lekharam Sonaram and Co. AIR

1965 SC 1591, Parkash Dev Chopra Vs. The New Bank of

India Ltd., New Delhi AIR 1968 Delhi 244 (DB), Kakoo Shah

Uttam Chand Vs. Kamla Wati AIR 1969 Delhi 120 and Sir

Hari Shankar Paul Vs. Kedar Nath Saha AIR 1939 Privy

Council 167, to contend that the document of creation of

equitable mortgage is not required to be registered; and,

(c) Smt. Rajamma Vs. Sri. Mahant P. Krishnandagiri

Goswamy AIR 1973 Mysore 310 (DB) and Sunil Kumar

Singh Vs. Life Insurance Corporation of India AIR 1976

Calcutta 224 (DB), to contend that equitable mortgage can be

created for money due earlier also.

AND

B. the counsel for the UPFC relying on Suraj Lamp and

Industries Pvt. Ltd. Vs. State of Haryana AIR 2012 SC 206,

Rambaran Prosad Vs. Ram Mohit Hazra AIR 1967 SC 744 and

Narandas Karsondas Vs. S.A. Kamtam AIR 1977 SC 774, to contend

that an Agreement to Sell is not a document of title even if

accompanied with a Power of Attorney,

but as aforesaid, the said question does not fall for adjudication

in the present case and I refrain from rendering any opinion thereon.

(X) The counsel for UPFC has also relied on Bakemans Industries

Pvt. Ltd. Vs. New Cawnpore Flour Mills AIR 2008 SC 2699 to

contend that rights granted to Financial Institutions under State

Financial Corporation Act have overriding effect on provisions of

Companies Act except Section 529A; on Punjab Financial

Corporation Vs. M/s Surya Auto Industries AIR 2010 SC 266 to

contend that the High Court cannot sit in appeal over the acts and

deeds of a financial corporation and on Union Bank of India Vs.

SICOM Ltd. (2009) 2 SCC 121 to contend that a debt which is

secured by reason of a provision of a statute becomes the charge over

the property and must be held to prevail over the crown debt due to

the State or King.