Delhi High Court
Jayant Ghadia vs Hindustan Tradex & Manufacturing ... on 9 December, 2019
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgement reserved on 10.04.2019
Judgement pronounced on 09.12.2019
+ EXECUTION PETITION No. 79/2014 & EXECUTION
APPLICATION (OS) Nos. 833/2015, 837/2015, 1122/2015,
167/2016, 68/2017 & 363/2017
JAYANT GHADIA ..... Petitioner
Through: Mr. Ankit Jain & Mr. Siddhant Nath,
Advocates.
versus
HINDUSTAN TRADEX & MANUFACTURING PVT LTD AND
OTHERS ..... Respondents
Through: Mr. Dinesh Agnani, Senior
Advocate with Mr. Shohit
Chaudhry, Advocate, for judgment
debtor no. 1
Mr. J.S. Lamba, Advocate, for
objector Kuldeep Singh Dalal.
Ms. Kajal Chandra with Ms. Prerna
Chopra, Advocates, for Objector
Ms. Amna Bi.
Mr. Sandeep Sharma with Mr.
Mrinal Srivastava, Advocates, for
objector VP Gupta.
CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER
RAJIV SHAKDHER, J.:
Preface
1. Principally I have been called upon to adjudicate upon Ex. P.
79/2014 (in short "Execution petition"). This execution petition has been
filed by one Mr. Jayant Ghadia (in short, "Ghadia"). Ghadia has filed an
application in the execution petition i.e. EA 363/2017. Via this application
Ghadia has sought a direction to summon documents from the concerned
Debt Recovery Tribunal. In the execution petition, Ghadia seeks
enforcement of the award dated 28.1.2009 (in short "award") passed by the
Learned Arbitrator in the matter titled "Jayant Ghadia versus Hindustan
Tradex & Manufacturing Private Limited and Ors."
1.1 The execution of the award is opposed by four persons who have
filed separate applications in this behalf. These applications are numbered
as EA 833/2015, EA 837/2015, EA 1122/2015, and EA 167/2016.
1.2 EA 833/2015 has been filed by one Mr. V.P. Gupta (hereafter
referred to as "objector No. 1"). EA 837/2015 has been filed by Amna Bi
(hereafter referred to as "objector No. 2"). EA 1122/2015 has been filed by
a person by the name Kuldeep Singh Dalal (hereafter referred to as
"objector No. 3"). EA 167/2016 has been filed by judgment debtor No. 1
i.e. Hindustan Tradex Manufacturing & Private Limited (hereafter referred
to as HTML).
1.3 Besides EA 363/2017, Ghadia has filed another application in which
the relief sought is directed against objector No. 1. This application is
numbered as EA(OS) 68/2017.
2. Therefore, the tenability of the objections filed by various objectors
and the applications filed by Ghadia, is in a sense, dependent on the
conclusion that I would reach with regard to the sustainability of the
execution petition.
Backdrop
3. Thus, in order to reach a conclusion either way, the following broad
facts are required to be noticed.
4. The record shows that HTML (which had on its board at one point in
time, one, Mr. Anil Shah as the managing director), secured a loan from
State Bank of India. In lieu of the loan offered by State Bank of India, the
following seven properties were offered as security:
(i) Flat no. 1209 & 1210, 12th Floor, 26, Kailash Building, K.G.
Marg, New Delhi-110001 (hereafter referred to as "K.G. Marg
Property no. 1");
(ii) Flat no. 309, 3rd Floor, Kanchanjunga Building, 18,
Barakhamba Road, New Delhi -110001 (hereafter referred to as
"Barakhamba Road Property");
(iii) Property No. 2139, Old Bus Stand, Ganesh Pura-B, Tri Nagar,
New Delhi (hereafter referred to as "Tri-Nagar Property no. 1");
(iv) Property no. 1211, Kailash Building, 26, K.G. Marg, New
Delhi-110001 (hereafter referred to as "K.G. Marg Property No. 2");
(v) Sub-Plot No. 1480/1, Holding No. 116(D), Ward No. 17,
Village Konka, S.K. Sahai Road, Circular Road, Ranchi (hereafter
referred to as "Ranchi property No. 1");
(vi) Sub-Plot No. 1480/2, Ward No. 17, Village Konka, S.K. Sahai
Road, circular Road, Ranchi (hereafter referred to as "Ranchi
property No. 2"); and
(vii) Property No. 2134, Old Bus Stand, Ganesh Pura, Tri Nagar,
New Delhi (hereafter referred to as "Tri Nagar Property No. 2")
5. There are claims and counter claims concerning the ownership of
some, if not, all the properties referred to above.
5.1 Ghadia claims that HTML owned K.G. Marg Property No. 1 and
Barakhamba Road Property.
5.2 Likewise, it is claimed by Ghadia that Tri Nagar Property No. 1 is
owned by a company by the name Aqua Cross Enterprises Private Limited
(in short "ACPL").
5.3 It is also the claim of Ghadia that K.G. Marg Property No. 2 is
owned by a company by the name Yogi Trading Company Private Limited
(in short YTPL).
5.4 Insofar as Ranchi Property No. 1 is concerned, it is claimed by
Ghadia that the same is owned by an individual by the name Ms. Bibha
Ranjan, who as per the record at one point in time was apparently
appointed as an additional director in HTML, ACPL and YTPL.
5.5 Insofar as the remaining two properties are concerned, i.e. properties
referred at serial No. (vi) and (vii), these were owned by, one, Mrs.
Sangeeta Shah, wife of Mr. Anil Shah.
5.6 It may also be relevant to note that along with Mrs. Bibha Ranjan,
Anil Shah and P.K. Srivastava were apparently appointed as directors on
the board of ACPL and YTPL apart from HTML.
5.7 What is however important to note at this stage is that properties
referred to in serial nos. (i) to (v) are subject matter of the award. While
properties in serial no. (i) to (iv) are subject matter of the Execution
Petition, the property referred to in serial no. (v) though part of the award is
curiously, not included in the execution petition.
5.8 Thus, the properties mentioned in the award will be collectively
referred to as the "award-properties" while the remaining three properties
(the details of which are given in serial no. (v) to (vii) in Paragraph 4
above), would be collectively referred to as "non-award" properties.
6. It appears that HTML defaulted in payment of its dues. This led to
SBI filing a recovery action i.e. O.A. 127/2002 in the concerned Debt
Recovery Tribunal (DRT). In this recovery action not only the borrower
company i.e. HTML was arrayed as a defendant but even the guarantors
and the mortgagors of the properties referred to hereinabove which formed
the security for the loan advanced to HTML were made part of the
recovery action.
7. Mr. Anil Shah, who, as indicated above, was one of the directors on
the board of the borrower company (i.e. HTML) passed away on
1.12.2003.
8. The record seems to suggest that Mr. Anil Shah and his wife Mrs.
Sangeeta Shah at some point in time acquired a Non-Resident Indian
("NRI") status and were located in the USA.
9. It appears that while the recovery action filed by SBI was pending
adjudication, it assigned the debt owed to it by HTML and its guarantors to
Standard Chartered Bank (hereafter referred to as "SCB").
9.1 The SCB, thereafter, entered into a "One Time Settlement" (OTS)
with HTML and its guarantors. The OTS amount was pegged at Rs.9.60
crores, which was required to be paid in three monthly instalments with
effect from 5.6.2008.
9.2 The fact that OTS had been arrived at between SCB and HTML is
reflected in SCB's letter dated 25.4.2008.
10. Apparently, in order to garner funds, a Memorandum of
Understanding dated 4.5.2008 (in short 2008 MOU No. 1) was executed
between HTML, ACPL, YTPL and Ms. Bibha Ranjan on one side and
Ghadia on the other. Pertinently, HTML, ACPL and YTPL executed the
2008 MOU No. 1 via Mr. P.K. Srivastava based on three separate board of
directors' resolutions dated 3.5.2008, all of which, have been attested by
Ms. Bibha Ranjan.
10.1 Parallelly, Ghadia had on the very same date i.e. 4.5.2008 entered
into another Memorandum of Understanding (in short 2008 MOU No. 2)
and an addendum with Mrs. Sangeeta Shah and her family (which included
her children and her father) in respect of the following properties:
(i) X-6B, Hauz Khas Enclave, New Delhi (hereafter referred to as
"Haus Khas Property")
(ii) Plot No. 148/02, Holding No. 1186(C), Ward No. 17, Village
Konka, S.K. Sahai Road, Circular Road, Ranchi (hereafter referred
to as "Ranchi Property No. 3")
[To be noted that except for the plot number the other indices which
describe Ranchi Property No. 2 are identical to Ranchi Property
No. 3. There is no clear indication in the record as to whether
Ranchi property No. 2 and 3 are the same properties or are separate
properties]
(iii) Plot no. 2134/166 and 2139/166, Old Bus Stand Road, Ganesh
Pura-B, Tri Nagar, Delhi-110035 (hereafter referred to as "Tri Nagar
Property No. 3")
[This property also replicates in description, except for the property
number, the properties referred to as Tri Nagar Property No. 1 and
Tri Nagar property No. 2. There is once again no clarity in the
record as to whether Tri Nagar Property No. 3 is a separate property
or a combination of Tri Nagar Property No. 1 and 2]
11. Interestingly, in and about 12.1.2009, Ghadia filed a petition under
Section 9 of the Arbitration and Conciliation Act, 1996 (in short "1996
Act") in this Court seeking an injunction against HTML, ACPL, YTPL and
Ms. Bibha Ranjan in relation to the following properties: i.e. K.G. Marg
property No. 1, Barakhamba Property, Tri Nagar Property No. 1, K.G
Marg property No. 2 and Ranchi Property No. 1.
12. The substantive prayer made in the Section 9 Petition was as
follows:
"a) pass ex-parte ad interim injunction
restraining the respondents, their servants, agents etc.
from in any manner creating any third party rights in
the properties detailed in para 1 of this petition;"
13. It appears that while the Section 9 petition was pending adjudication,
a joint application under Order XXIII Rule 3 read with Section 151 of the
Code of Civil Procedure, 1908 (in short "CPC") was filed by the parties
herein for recording the terms of compromise; this application was
accompanied by the 2008 MOU No. 1. Evidently, on 20.1.2009 the court
appointed a Retired Judge of this Court as an arbitrator in the matter qua
persons and entities who were parties to the Section 9 petition. Via the
very same order, the Court also directed the parties to appear before the
learned arbitrator on 22.1.2009.
13.1 Before the arbitrator, Ghadia filed a Statement of Claim ("SOC") on
22.1.2009. In the SOC, Ghadia adverted to the 2008 MOU No. 1 and
prayed that an award be passed in his favour in terms of the said MOU. In
other words, he sought specific performance of the 2008 MOU No. 1. The
respondents who were also represented on 22.1.2009 before the learned
arbitrator conveyed to him that they would require a short accommodation
to seek instructions, although, they had almost settled the disputes with
Ghadia. The learned arbitrator, accordingly, adjourned the proceedings to
23.1.2009.
13.2 On 23.1.2009 the respondents filed a written statement admitting
Ghadia's claim. The respondents also conveyed to the learned arbitrator
that an award be passed in terms of the compromise arrived at between the
parties before him in respect of the properties referred to in the 2008 MOU
No. 1.
14. The learned arbitrator, accordingly, after noting the fact that the
parties had arrived at a settlement passed an award on the terms agreed to
between the parties. This award as noted above, was rendered on
28.1.2009.
14.1 Pertinently, in the award, the learned arbitrator noted the fact that
Ghadia had paid at the time of execution of the 2008 MOU No. 1, Rs.60
lacs out of a total amount of Rs.6.35 crores.
14.2 The learned arbitrator also recorded, that at the time of rendering the
award, out of the balance amount of Rs.5.75 crores, Ghadia had paid a
further amount of Rs.3.75 crores to SCB and that what remained to be paid
at that point in time, was an amount of Rs.2 crores. The dispute, according
to the learned arbitrator, arose on account of respondents refusing to sell
the K.G. Marg property No. 1 and the Barakhambha Road property to
Ghadia despite having arrived at consensus amongst themselves as per the
terms incorporated in the 2008 MOU No. 1. This disagreement have been
resolved, led to the passing of the award based on the compromise arrived
at by the parties.
14.3 Significantly one of the terms of the compromise which formed part
of the award required Ghadia to pay the balance amount of Rs.2 crores to
the SCB within ten (10) days of the passing of the award.
15. Insofar as Ghadia's 2008 MOU No. 2 was concerned, it required
Ghadia to pay a total sum of Rs.5.50 crores in the following manner:
(i) Rs. 2 crores to be paid directly to SCB on behalf of Mrs. Sangeeta
Shah and her family.
(ii) Out of the balance amount of Rs.3.50 crores, a further amount
equivalent to Rs. 1.25 crores was required to be paid by Ghadia directly to
SCB for liquidating the liability of Sangeeta Shah and her family in terms
of SCB's letter dated 25.4.2008.
(iii) The remaining amount equivalent to Rs.2.25 crores was required to
be paid by Ghadia to Mrs. Sangeeta Shah and her family at the time of
execution and registration of sale deeds in respect of the Haus Khas
property, the Ranchi Property No. 3 and the Tri Nagar Property No. 3.
15.1 The addendum, to the 2008 MOU No. 2, to which I have made a
reference above, only adverted to the fact as to how the persons who are
parties to 2008 MOU No. 2 valued the properties comprised therein. Thus,
as per the addendum, out of the total consideration of Rs.5.50 crores, an
amount equivalent to Rs.4.50 crores was ascribed as consideration for the
Haus Khas property. Insofar as Ranchi Property No. 3 and Tri Nagar
Property No. 3 were concerned, under the addendum, the consolidated
value was pegged at Rs.1 crore.
16. At this juncture, it may be important to note that Mrs. Sangeeta Shah
and family had appointed, one, Mr. Manohar Meshram as their power of
attorney. It is also pertinent to note that Mrs. Sangeeta Shah, on
01.03.2009, revoked Mr. Manohar Meshram's power of attorney.
However, on 5.3.2009, Mr. Manohar Meshram executed a power of
attorney in favour of Ghadia in respect of Ranchi Property No. 3.
16.1 The record shows that Mr. Manohar Meshram received an e-mail
dated 15.3.2009 from Mrs. Sangeeta Shah informing him about revocation
of the power of attorney executed in his favour.
16.2 On 19.3.2009, Mr. Manohar Meshram sent an e-mail to Ghadia
informing him that his power of attorney had been revoked by Mrs.
Sangeeta Shah.
17. However, the SCB upon receiving payments, amounting to Rs.10.75
crores, issued a "No Dues Certificate" (in short "NDC") to HTML on
13.8.2009. The NDC issued was in the form of a communication, which,
as indicated above, is dated 13.8.2009. This was preceded by a letter dated
1.8.2009 which was also addressed by SCB to HTML. This letter was
issued in anticipation of the demand drafts handed over towards OTS being
encashed. Once the bank drafts were encashed, the NDC was issued as
noticed above vide letter dated 13.8.2009.
17.1 Interestingly, all this while Ghadia did not take any steps for the
execution of the award. What makes it even more curious, is that, Ghadia
thereafter entered into another Memorandum of Understanding dated
21.10.2010 (2010 MOU) with Mrs. Sangeeta Shah. This MOU was
followed by of a Settlement Agreement dated 10.11.2010 (in short "2010
SA") being executed between himself and Mrs. Sangeeta Shah.
18. A perusal of the recitals contained in the 2010 SA would show that it
not only refers to the seven immovable properties referred to in paragraph
4 above, i.e. the award and non-award properties but it also refers to the
award which was passed in favour of Ghadia based on the 2008 MOU No.
1.
18.1 Furthermore, the 2010 SA not only adverts to the company petitions
filed by Mrs. Sangeeta Shah i.e. Company Petition no. 18 (ND) of 2009 and
two other company petitions pertaining to 2010 but also to the FIR No.
207/2010, registered at P.S. C.R Park, which was registered based on
Ghadia's complaint against Mrs. Sangeeta Shah. Interestingly, both Mr.
P.K. Srivastav and Ms. Bibha Ranjan were confirming parties to the 2010
SA.
19. In furtherance of obligations undertaken under the 2010 SA, Mrs.
Sangeeta Shah has, admittedly, withdrawn her company petitions which
were filed at the relevant point of time in the Company Law Board.
19.1 An order in this behalf was passed by the Company Law Board on
19.11.2010.
19.2 Insofar as FIR No. 207/2010 was concerned, there is on record an
order dated 31.3.2017 passed by the Metropolitan Magistrate, South-East
District, New Delhi (in short "M.M."). Via this order Mrs. Sangeeta Shah
was discharged by the Learned M.M. The Learned M.M. in this order
concluded, that no offence of criminal breach of trust or cheating under
Section 406 and 420 of the Indian Penal Code, 1860 (in short "IPC") was
made out against Mrs. Sangeeta Shah.
19.3 However, contrary to the terms of 2010 SA whereunder Ghadia was
required to assist Sangeeta Shah in having the said FIR quashed, she had to
go through the full rigor of law for seeking a discharge qua the
aforementioned offences.
20. As would be evident from the narration of events set forth
hereinabove, in the interregnum, i.e. in and about 4.03.2014, Ghadia
moved this Court for execution of the award.
20.1 On 7.3.2014, in the Execution Petition, an interim order was passed
qua the judgment debtors, (i.e. HTML, ACPL, YTPL and Ms. Bibha
Ranjan) whereby they were injuncted from dealing, in any manner, with
the following four properties:
(i) K.G. Marg Property no. 1
(ii) Barakhamba Property
(iii) Tri-Nagar Property 1
21. In the Execution Petition, the other substantive order which was
passed, was the order dated 21.4.2015. Via this order on account of non-
appearance of the judgment debtors warrants of attachments were issued
vis-a-vis the four properties referred to above, which formed part of the
Execution Petition.
22. The record also shows that fresh warrants of attachment were, once
again, issued on 6.2.2018 as it was not clear as to whether or not the
warrants of attachment issued on 21.4.2015 had been executed.
22.1 The record also shows that since process fee was not filed, on
6.4.2018, for the third time, fresh warrants of attachment were issued. In
the interregnum, objections to the Execution Petition were filed by various
persons; an aspect which I have referred to hereinabove.
Submissions of the Counsel:
23. Given this background, arguments on behalf of the decree holder
(i.e. Ghadia) were advanced by Mr. Ankit Jain, Advocate. Likewise
submissions on behalf of objector No. 1, 2 and 3 were advanced by Mr.
Sandeep Sharma, Ms. Kajal Chandra, and Mr. J.S. Lamba respectively.
HTML was represented by Mr. Dinesh Agnani, Sr. Advocate, instructed by
Mr. Shohit Choudhry.
24. The submissions made by Mr. Ankit Jain can, broadly, be summed
up as follows:
(i) The award was based on a compromise arrived at between Ghadia,
on one side, and the judgment debtors, on the other, which included
HTML, ACPL, YTPL, and Ms. Bibha Ranjan and therefore, it was binding
on those who were parties to the consent-award.
(ii) The objections which have been filed only relate the K.G. Marg
property no. 1, Barakhamba Road property and Tri Nagar property No. 1.
No objections have been filed vis-à-vis K.G. Marg property No. 2.
Furthermore, while objections have been filed by HTML, no objections
have been filed by ACPL and YTPL. Thus, there was no impediment in
the execution of the award vis-à-vis K.G. Marg property No. 2.
(iii) The argument advanced on behalf of HTML that the award was
superseded by the 2010 SA does not find a mention in the objections filed
with the Court. This is an argument which has been advanced on behalf of
HTML across the bar. In any event, Mrs. Sangeeta Shah, who is the
majority shareholder in HTML and is a signatory to the 2010 SA did not
deem it fit to mention this fact in the 2010 SA, which is, that the award had
been superseded even though there is a reference to the same. The 2010 SA
refers to Ghadia as the decree holder which is suggestive of the fact that
since the award had not been challenged by HTML, despite having
acquired knowledge of the same, it had morphed into a decree.
(iv) Clause (viii) of the terms of agreement of the 2010 SA clearly
provides if the properties referred to therein were not sold within nine
months, then they shall vest in the decree holder (i.e. Ghadia), and thus, the
objections of HTML are untenable.
(v) The objection raised by HTML that the 2008 MOU No. 1 was
executed on its behalf by persons who were not vested with the requisite
authority is a contention which ought to be rejected as the application filed
under Order XXIII Rule 3 of the CPC with this Court was accompanied by
Board of Directors resolution of not only HTML but other two judgment
debtors as well i.e. ACPL and YTPL.
(vi) Insofar as the objection raised that Rs. 2 crores was not paid by
Ghadia within the time span of ten (10) days as per the terms of the
consent-award, it was an objection which cannot be sustained for following
reasons:
(a) Ghadia after making the necessary payments had obtained a NDC
from SCB on 1.8.2009/13.8.2009.
(b) HTML did not take out any proceedings on account of alleged non-
compliance with the terms of the award.
(c) The plea raised on behalf of HTML i.e. non-payment of Rs. 2 crores
within the time prescribed in the award was self-destructive of the other
plea that the award was passed without its consent.
(d) The 2010 SA to which, Mrs. Sangeeta Shah is a signatory clearly
adverts to the fact that Ghadia had made payments and obtained a NDC.
Mrs. Sangeeta Shah being a majority shareholder in HTML would, in a
sense, bind HTML as well.
24.1 Insofar as the submissions that Mr. Jain made on behalf of the decree
holder i.e. Ghadia qua the issues raised by Objector no. 1 and Objector no.
3 are concerned, the same can be summed up as follows:
(i) The sale has been effected via documents such as General Power of
Attorney (GPA), agreement to sell and purchase, affidavit, receipt, and
possession letter dated 30.8.2012. None of these documents can convey
title. Reliance in this behalf was placed on Suraj Lamp & Industries Pvt.
Ltd. Vs. State of Haryana, AIR 2012 SC 206.
(ii) Furthermore, objector No. 3, if at all, could have claimed protection
under Section 53A of the Transfer of Property Act, 1882, only if, the said
documents were registered as provided in Section 17(1A) of the
Registration Act, 1908. This amendment was brought in force on
24.9.2001 whereas the aforementioned documents were executed on
30.8.2012.
(iii) Doctrine of lis pendens as statutorily recognized under Section 52 of
the Transfer of Property Act, (in short "T.P. Act"), trumps the argument of
good faith and/or bona fide purchaser advanced by objector No. 3.
Reliance in this behalf was placed on the judgment rendered in Bhim
Singh vs. Amar Nath & Ors., 149 (2008) DLT 34.
(iv) The aforementioned documents in favour of objector No. 3 have
been executed by one, Mr. Jitendra Mishra, whose wife Mrs. Neelam
Mishra was a witness to the 2010 SA. The documents, thus, executed in
favour of objector No. 3 were fraudulent.
(v) Objector No. 1 who claims to be a tenant has no standing in the eyes
of law as his right in the subject property can only arise if the right of
Objector No. 3 in the Barakhamba Road property is sustained.
Furthermore, the tenancy of objector No. 1 came to an end on 14.5.2016,
and that thereafter, no fresh lease deed was executed in his favour.
24.2 Likewise Mr. Jain's submission on behalf of the decree holder i.e.
Ghadia to the objections raised by Objector no. 2 vis-à-vis the Tri Nagar
property No. 1, can be summarized as follows:
(i) In respect of this property, objector No. 2 claims a right based on a
sale deed dated 18.3.2013 executed in her favour by, one, Mohd. Sajjad
Ahmed Khan. A perusal of the said sale deed would show that Mohd.
Sajjad Ahmed Khan claims right in the Tri Nagar property No. 1 based on
a power of attorney. Power of attorney, in law, cannot confer ownership
rights. Furthermore, Mohd. Sajjad Ahmed Khan has claimed that the
power of attorney was executed in his favour by Mr. Anil Shah, who
expired in 2003. Therefore, upon his death, Mohd. Sajjad Ahmed Khan's
right to deal with the property came to an end and, thus, he could not have
executed the aforementioned sale deed dated 18.3.2013.
(ii) In this context, it is required to be noted that this Court vide order
dated 24.8.2017 had directed objector No. 2 to place on record the entire
trail of title documents with respect to Tri Nagar Property no. 1.
(iii) Furthermore, Tri Nagar property no. 1 was mortgaged by its owner
ACPL after SBI had carried out a title search. Therefore, the objections
sought to be raised are both, factually and legally, unsustainable.
25. On the other hand, Mr. Agnani, learned Senior Advocate, on behalf
of HTML submitted that HTML received information concerning the
execution proceedings via objector No. 3 when he was served with the
order of attachment dated 21.4.2015.
25.1 The other submissions made on behalf of HTML can be summed up
as follows:
25.2 HTML upon becoming aware of the execution proceedings entered
appearance in this Court via a counsel on 24.8.2015. A copy of the paper
book was received by the counsel for HTML only on 26.8.2015.
25.3 On merits, Mr. Agnani contended that the award was a product of
fraud played on the learned sole arbitrator by Ghadia and the then officers
of HTML. The persons said to be representing HTML at that point in time
had not been authorized by the Board of Directors of HTML. The said
officers were thus, incompetent to either file a written statement or concede
the case set up by Ghadia before the learned arbitrator. These officers
could not have even consented to the appointment of an arbitrator in the
matter.
25.4 In this context, it was emphasised that the counsel i.e. Mr. N.N.
Aggarwal, who represented Ghadia before the learned arbitrator was also
holding out himself to be the authorized representative of HTML before
SCB. On this score, reliance was placed on letters dated 30.1.2009 and
9.8.2008 exchanged between SCB and HTML.
25.5 HTML had not authorized any person or director to enter into the
2008 MOU No. 1 with Ghadia. The consent on behalf of HTML was,
purportedly, given by Mr. P.K. Srivastava and Ms. Bibha Ranjan, who had
acted without the knowledge and due authorization of HTML. These two
persons acted in concent with Ghadia in not only executing the 2008 MOU
No. 1 but also in having the award being passed.
25.6 It was also contended that Ms. Bibha Ranjan was appointed as the
additional director by HTML on 1.12.2003. The appointment was made
without the shareholders resolution which had to be passed either at an
AGM or an EGM. The appointment of Ms. Bibha Ranjan being a nullity in
the eyes of law, she could not have acted on behalf of HTML. Therefore,
Mr. P.K. Srivastava, acting alone, lacked the authority to execute the 2008
MOU No. 1 on behalf of HTML.
25.7 Assuming without admitting that the 2008 MOU No. 1 was a valid
document in the eyes of law, the terms and conditions contained therein
had not been complied with by Ghadia. As per the terms of the 2008 MOU
No. 1, Ghadia was required to pay Rs.2 crores within ten (10) days from
the date of passing the award. The Execution Petition makes no mention as
to the manner in which Ghadia paid Rs.2 crores to SCB. Ghadia has not
placed on record any documents which would prove that he himself had
paid the said sum to SCB. Besides this, no document has been placed on
record by Ghadia to demonstrate the date and the manner in which the said
sum was paid to SCB.
25.8 As is evident upon perusal of the letter dated 30.1.2009 issued by
SCB to HTML, the OTS arrived at with HTML was cancelled. Therefore,
the original title deeds were not released by SCB. Given these
circumstances, HTML could not have executed sale deeds in favour of
Ghadia, as contended. In sum, the award had become unenforceable and
void. The fact that the earlier OTS stood cancelled is evident by virtue of
the fact that the NDC was issued by SCB in favour of HTML only on
13.8.2009.
25.9 Before issuance of the restraint order by this Court on 21.4.2015, the
Barakhamba Road property stood sold to objector No. 3 on 30.8.2012.
Insofar as the K.G. Marg property No. 2 is concerned, the same has already
been attached by Canara Bank.
25.10 In the Execution Petition, the prayer made by Ghadia is that the
award should be enforced. In other words, sales deeds should be executed
in his favour by the judgment debtors i.e. HTML, ACPL, YTPL and Ms.
Bibha Ranjan. Therefore, attachment and sale of properties would not
satisfy the award which according to Ghadia, has morphed into a decree.
Thus, the mode of assistance sought by Ghadia for enforcement/execution
of the award is contrary to the terms of the award.
25.11 The 2010 SA has neither any bearing nor does it relate to the
captioned petition insofar as HTML is concerned. Lastly, the award is,
insufficiently stamped and hence cannot be executed.
26. Mr. Sandeep Sharma, who appeared on behalf of objector No. 1
made the following submissions:
26.1 Objector No. 1 who is the tenant/lessee of Barakhamba Road
property claims that he became aware of the order of restraint dated
21.4.2015 only on 3.8.2015.
26.2 It was also contended that objector No. 1 had entered into a lease
agreement qua the Barakhamba Road property and a hire agreement vis-à-
vis the furniture and fixtures placed therein. These agreements were
executed between Objector No. 1 and Mrs. Sangeeta Shah. These
agreements were executed on 1.10.2001. The lease was executed between
Hindustan Polychem Private Limited, the predecessor-in-interest of HTML
while the hire agreement was executed between Objector No. 1 and Mrs.
Sangeeta Shah.
26.3 The fact that there was a change in name of the lessor i.e. from
Hindustan Polychem Private Limited to HTML was communicated to
Objector No. 1 vide letter dated 18.4.2002. Likewise, Mrs. Sangeeta Shah
vide letter dated 18.4.2002 requested objector No. 1 that the rent qua
furniture and fixtures should be paid to the account of her husband i.e. Mr.
Anil Shah and that she had assigned her rights in the hire agreement dated
29.9.2001 in his favour.
26.4 The lease agreement dated 1.10.2001 and the hire agreement dated
29.9.2001, according to the objector No. 1 were executed for an initial
tenure of three years spanning between 1.10.2001 and 30.9.2004.
27. Objector No. 1 has stated in his application that vide letter dated
23.12.2003 he was communicated that the rent cheque which was earlier
issued in favour of HTML should be made out in the name of YTPL on
account of the fact that Mr. Anil Shah had expired.
27.1 It is also contended that on 9.8.2011, Mrs. Sangeeta Shah wrote to
Objector No. 1 that she should be paid the rent for furniture and fixtures
which were due since November 2004. According to Objector No. 1, after
the death of Mr. Anil Shah, both the lease rent and the hire charges
between 1.12.2004 and 14.11.2011 were paid to Mrs. Sangeeta Shah in
respect of which Mrs. Sangeeta Shah issued an indemnity bond in favour
of the Objector no. 1.
27.2 Objector No. 1 also avers that a fresh lease was executed between
him and HTML on 3.2.2012. This lease had a tenure of four years and six
months. It commenced on 15.11.2011 and expired on 14.5.2016.
27.3 Likewise, according to objector No. 1, a fresh hire agreement was
executed on 15.11.2011 with Mrs. Sangeeta Shah, which expired on
14.5.2016.
27.4 Furthermore, on behalf of objector No. 1, it was pointed out that in
August 2012 he was informed by HTML that the demised premises i.e.
Barakhamba Road Property had been transferred by HTML to objector No.
3 via an agreement to sell and, therefore, he should attorn to objector No. 3
with effect from 1.9.2012. It was also contended on behalf of Objector No.
1 that it had not executed a fresh lease deed with objector No. 3 as he had
already attorned to objector No. 3 in terms of clause 16 of the lease deed
dated 3.2.2012.
27.5 In sum, the argument advanced on behalf of objector No. 1 was that
Barakhamba Road property did not belong to judgment debtor No. 1 or any
of the other judgment debtors i.e. ACPL, YTPL or Ms. Bibha Ranjan. The
Barakhamba Road property having been sold to objector No. 3 on
30.8.2012, prior to its attachment, could not form the subject matter of the
present execution proceedings.
27.6 Therefore, the contention advanced on behalf of objector No. 1 was
that the attachment order was passed vis-à-vis the Barakhamba Road
property in the absence of the information that the property in issue had
already changed hands. It was, thus, submitted on behalf of objector No. 1
that the attachment order passed qua the Barakhamba Road property should
be lifted.
27.7 In the alternative, the prayer made was that in case the Barakhamba
Road property is attached, the objector No. 1 being a lawful lessee, he
should not be dispossessed without following due process of law.
28. On behalf of objector No. 3, arguments were advanced by Mr. J.S.
Lamba who contended that the Barakhamba Road property had been
purchased by objector No. 3 on 30.8.2012 via GPA, agreement to sell, and
purchase, affidavit and receipts; all dated 30.8.2012.
28.1 Reliance in this behalf was also placed on the possession letter dated
30.8.2012 to establish that pursuant to execution of the aforementioned
documents, objector No. 3 had obtained possession of the Barakhamba
Road property. The argument was that objector No. 3 was a bona fide
purchaser of the Barakhamba Road property. It was further contended that
objector No. 3 had no knowledge of the award and that in any case the
award stood superseded by 2010 SA.
28.2 It was also be pointed out that the 2010 SA incorporated an
arbitration agreement and, therefore, Ghadia could exercise his rights, if
any, vis-à-vis the Barakhamba Road property only by taking recourse to
the arbitration agreement which stood incorporated in clause 18 of the
2010 SA and not via the instant execution petition.
28.3 Since, admittedly, the payments under the award were not made
within time as stipulated in the award, the instant execution petition was
not maintainable.
28.4 In any event, the 2010 SA has been acted upon by Mrs. Sangeeta
Shah as she had withdrawn the company petitions filed by her.
Furthermore, Mrs. Sangeeta Shah stood discharged by the concerned court
vide order dated 31.3.2017 in respect of the proceedings which emanated
from FIR No. 207/2010, dated 28.9.2010, which in turn, was based on a
complaint filed by Ghadia. Although the 2010 SA required Ghadia to
assist Sangeeta Shah in having the said FIR quashed, she was needlessly
required to go through the rigour of law as Ghadia refused to extend the
necessary assistance.
28.5 The concerned court after examining the matter in great detail had
commented on the conduct of Ghadia. Reference in this behalf was made
to the observations made in paragraphs 23 and 24 of the learned MM's
order dated 31.3.2017.
28.6 It was further contended that even otherwise Ghadia had not paid
Rs.2 crores to SCB as stipulated in the award within ten (10) days as
required and that this payment was made later on by, one, Ms. Sulochana
Goyal upon sale of an immovable property owned by the father of Mrs.
Sangeeta Shah. In sum, it was contended that Ghadia was not entitled to
seek execution in the award which was superseded by the 2010 SA.
Analysis and Reasons:
29. I have heard contentions of the counsel for the parties and also
perused the record. The narration of facts and events as noted hereinabove
would show that the transaction with regard to award and non-award
properties and two properties belonging to Sangeeta Shah are entwined.
29.1 As indicated hereinabove, there are five properties referred to in the
award. These are property bearing Nos. (i) to (v) as mentioned in paragraph
4 above. The Execution Petition, however, refers to and/or seeks
enforcement of the award only vis-à-vis the first four properties. Insofar as
the fifth property is concerned, i.e. Ranchi property No. 1, the owner, even
according to Mrs. Sangeeta Shah, is Ms. Bibha Ranjan.
29.2 Though the award was passed as far back as on 28.1.2009, Ghadia
for some reason did not seek execution of the award, and, instead entered
into the 2010 SA in which, there is not only a reference to the award
properties and the non-award property but there is also a reference to two
other properties, over which, ownership is claimed by Mrs. Sangeeta Shah.
29.3 Therefore, in all, the 2010 SA refers to seven properties, which
includes as indicated above the award properties, which are four in
number, one property which apparently is owned by Ms. Bibha Ranjan and
two properties which are, apparently, owned by Mrs.Sangeeta Shah.
29.4 The 2010 SA has been executed between Ghadia and Mrs. Sangeeta
Shah and the confirming parties to the said agreement are Mr. P.K.
Srivastava and Ms. Bibha Ranjan.
30. The award, on the other hand, is based on the 2008 MOU No. 1.
This MOU was executed on 4.5.2008. On that very date, Ghadia executed
another MOU i.e. 2008 MOU No. 2 with Mrs. Sangeeta Shah concerning
three properties i.e Hauz Khas Property, Ranchi Property No. 3 and Tri
Nagar Property no. 3(as mentioned in
10.1 above). These are properties which are, apparently, owned by Mrs.
Sangeeta Shah and her family.
30.1 Under the award, which was pivoted on the 2008 MOU No. 1,
Ghadia was required to pay a total amount of Rs. 6.35 crores to SCB.
There was, admittedly, a delay as Mr. N.N. Aggarwal, Advocate, who
represented Ghadia in the arbitration proceedings, acted as the authorized
representative of HTML and sought extension of time for making the
deficit payment to SCB. This extension of time was sought via letter dated
9.8.2008.
30.2 SCB, however, terminated the OTS vide communication dated
30.01.2009 addressed to HTML (marked to N.N. Aggarwal), on the ground
that the balance OTS amount aggregating to Rs.2,45,20,929/- had not been
paid by the end date i.e. 26.12.2008. SCB via this very letter also
communicated that the amount already paid towards OTS would stand
forfeited and that the liability of HTML and its guarantor(s) as per the loan
agreements would stand restored.
30.3 The record shows that, thereafter, on 01.8.2009 SCB issued a letter
which, effectively, demonstrated that towards the loan taken by HTML a
total amount of Rs.10.75 crores had been paid.
30.4 Consequently, a NDC was issued in favour of HTML on 13.8.2009.
30.5 The aforementioned letters i.e. letters dated 1.8.2009 and 13.8.2009
were marked to Mr. P.K. Srivastava in his capacity as the director of
HTML.
30.6 Ordinarily, Ghadia should have been satisfied with this outcome, as
the amounts under the OTS had been paid, as per his assertion, entirely by
him, and therefore, the properties referred to in the award should have
come to him. However, Ghadia chose to execute the 2010 SA with Mrs.
Sangeeta Shah and as alluded to above, with regard to not only the award
properties, non-award property but also two properties owned by Mrs.
Sangeeta Shah.
31. It appears that because the Shah's were not, perhaps, based in India
at the relevant point of time, the affairs of HTML were somehow being
managed by Mr. P.K. Srivastava and Ms. Bibha Ranjan.
31.1 It is quite obvious that there were legal lacunas in the 2008 MOU
No. 1 as it was based on an authority given to Mr. P.K. Srivastava by Ms.
Bibha Ranjan when she was in law, not a director on the Board of HTML.
Ms. Bibha Ranjan was appointed as an additional director in 2003. There is
no document placed on record as to whether her appointment as the
director was confirmed in the following AGM of the shareholders, as per
the provisions of Section 260 of the Companies Act, 19561. Therefore, the
2008 MOU No. 1 could not have been executed by Mr. P.K. Srivastava
based on a resolution, to which, Ms. Bibha Ranjan was a party.
31.2 It is not Ghadia's case that Mrs. Sangeeta Shah was either present or
her consent was taken when the Board of Directors resolution was passed
authorizing Mr. P.K. Srivastava to act on behalf of HTML.
31.3 It is, perhaps, for this reason that Ghadia entered into the 2010 SA.
There was otherwise no good reason for Ghadia to enter into 2010 SA with
Mrs. Sangeeta Shah concerning the properties which were already the
subject matter of the award.
31.4 The argument advanced on behalf of Ghadia that there was reference
to the award in the 2010 SA, to my mind, only goes to show that Ghadia
was aware of the legal untenability of the award and the 2008 MOU No. 1
of which formed the basis of the award.
31.5 The very fact that till March, 2014 Ghadia chose not to seek
execution of the award points to the direction that the award, even
according to him, was flawed and was a product of manipulation to which
he, Mr. P.K. Srivastava and Ms. Bibha Ranjan were parties.
260. Additional directors. -Nothing in section 255, 258 or 259 shall affect any power conferred on the
Board of directors by the articles to appoint additional directors.
Provided that such additional directors shall hold office only up to the date of the next annual general
meeting of the company.
Provided further that the number of the directors and additional directors together shall not exceed the
maximum strength fixed for the Board by the articles.
31.6 That being said, it also emerges from the record that Ghadia has paid
monies to SCB. There is no denial by the judgment debtors i.e. HTML,
ACPL, YTPL, Ms. Bibha Ranjan or by Mrs. Sangeeta Shah that Rs. 4.35
crores was paid by Ghadia in pursuance of the 2008 MOU No. 1.
31.7 Insofar as the balance amount of Rs.2 crores is concerned, it cannot
be disputed that Ghadia was required to pay within the timeline stipulated
therein under the award.
31.8 In this context the argument advanced on behalf of the objector No.
3 that Rs.2 Crores was not paid within ten days of the passing of the award,
as agreed between those who were parties to the award, attains significance
as Ghadia has failed to even make an assertion as to the date and the
manner in which Rs.2 crores was paid by him to SCB.
32. Although it is not connected with the execution of the award, Ghadia
under the 2008 MOU No. 2, has paid only Rs.2 crores against a total
amount of Rs.3.25 crores which he was required to pay to SCB. The
balance amount, i.e. Rs.2.25 crores was required to be paid to Mrs.
Sangeeta Shah.
33. Therefore, while the award had lost its efficacy, even according to
Ghadia, which is the reason why there was a reference to the same in the
2010 SA, the objector Nos. 2 and 3 may not have any legal title to the
properties over which they lay claim. Insofar as objector No. 3 is
concerned, he claims title based on GPA, agreement to sell etcetra, none of
which have been registered. Insofar as the objector No. 2 is concerned,
even though she claims right to property based on a sale deed dated
18.3.2013, her predecessor-in-interest Mohd. Sajjad Ahmed Khan bases his
right on a power of attorney, agreement to sell, and a Will dated 5.5.1998.
The Will which is dated 5.5.1998 does not bear signatures of two
witnesses, as required under section 63(c) of the India Succession Act,
1925. Therefore, the Will which is stated to have been executed by Anil
Shah in favour of Mohd. Sajjad Ahmed Khan is not valid in the eyes of
law.
33.1 As correctly argued by Mr. Ankit Jain, the power of attorney came to
an end with the death of Mr. Anil Shah. The power of attorney which
formed the basis of the agreement to sell after Mr. Anil Shah's death lost
its efficacy in the eyes of law.
33.2 Insofar as objector No. 1 is concerned, the material on record does
show that he entered into the property in the capacity of a lessee and
thereafter continues in possession of the subject property though the last
lease agreement and the hire agreement ended in 2016. Therefore, the fact
that he is in lawful occupation of Barakhamba Road Property cannot be
doubted. Objector No. 1 is, therefore, right in his assertion that he can be
evicted from the said property only after following the due process of law.
34. Thus, for the foregoing reasons I am of the view that the Execution
Petition qua the aforementioned award would not lie. This, however, will
not foreclose Ghadia from taking recourse to an appropriate remedy in
accordance with the law to agitate his rights qua the properties which are
subject matter of the award and/or in respect of monies paid by him to SCB
qua the debt of HTML.
35. Consequently, Execution Petition No. 79/2014 is dismissed.
Resultantly, EA No. 363/2017 and 68/2017 shall stand closed. Objections
of Objector Nos. 2 and 3 i.e. EA 837/2015 and EA 1122/2015 respectively
are also dismissed. EA No 833/2015 filed by objector No. 1 is disposed of
in terms of the observations made in paragraph 33.2 above. Objections of
HTML are also disposed of having regard to the fact that the Execution
Petition has been dismissed. Costs will follow the result.
(RAJIV SHAKDHER)
JUDGE
DECEMBER 09, 2019
VKR
