S.Senguttuvan vs M/S.Industrial Credit And ...
2021 Latest Caselaw 3990 Mad

                                                                         C.M.A.Nos.1146 to 1150 of 2016

                                    IN THE HIGH COURT OF JUDICATURE AT MADRAS

                                                  DATED : 17.02.2021

                                                        CORAM

                                   THE HONOURABLE MR. JUSTICE S.M.SUBRAMANIAM

                                             C.M.A.Nos.1146 to 1150 of 2016
                                           and C.M.P.Nos.8673 to 8677 of 2016

                     1.S.Senguttuvan

                     2.S.Mehala                                              .. Appellants
                                                                                in all appeals
                                                          Vs.
                     1.M/s.Industrial Credit and Development
                        Syndicate Limited Manipal represented
                        by its Power of Attorney Holder
                       K.Balakrishna Rao, having branches all
                       over India and having one of its Branch
                       at Big Bell Complex, R.S.Puram,
                       Coimbatore.

                     2.M/s.Erode Rana Textile Processors (P) Ltd.,
                       by its Managing Director,
                       474, Valayakara Street, Erode – 1 now at
                       Varadhanallur,
                       Bhavani – 638 302.

                     3.L.Saroja

                     4.L.Kumaravel

                     5.L.Sakthi                                              .. Respondents

in all appeals

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Prayer in C.M.A.No.1146 of 2016: Civil Miscellaneous Appeal filed under Order 43 Rule 1(4) r/w Section 104(1)(i) of CPC and Order 21 Rule 58 (4) of CPC, against the fair and decreetal order dated 15.03.2016 passed in E.A.No.16 of 2008 in E.P.No.4 of 2005 in A.P.No.124 of 2000 on the file of the I Additional District Court, Erode and to set aside the same.

Prayer in C.M.A.No.1147 of 2016: Civil Miscellaneous Appeal filed under Order 43 Rule 1(4) r/w Section 104(1)(i) of CPC and Order 21 Rule 58 (4) of CPC, against the fair and decreetal order dated 15.03.2016 passed in E.A.No.17 of 2008 in E.P.No.5 of 2005 in A.P.No.02 of 2001 on the file of the I Additional District Court, Erode and to set aside the same.

Prayer in C.M.A.No.1148 of 2016: Civil Miscellaneous Appeal filed under Order 43 Rule 1(4) r/w Section 104(1)(i) of CPC and Order 21 Rule 58 (4) of CPC, against the fair and decreetal order dated 15.03.2016 passed in E.A.No.18 of 2008 in E.P.No.6 of 2005 in A.P.No.11 of 2002 on the file of the I Additional District Court, Erode and to set aside the same.

Prayer in C.M.A.No.1149 of 2016: Civil Miscellaneous Appeal filed under Order 43 Rule 1(4) r/w Section 104(1)(i) of CPC and Order 21 Rule 58 (4) of CPC, against the fair and decreetal order dated 15.03.2016 passed in E.A.No.19 of 2008 in E.P.No.7 of 2005 in A.P.No.228 of 2000 on the file of the I Additional District Court, Erode and to set aside the same.

Prayer in C.M.A.No.1150 of 2016: Civil Miscellaneous Appeal filed under Order 43 Rule 1(4) r/w Section 104(1)(i) of CPC and Order 21 Rule 58 (4) of CPC, against the fair and decreetal order dated 15.03.2016 passed in E.A.No.20 of 2008 in E.P.No.8 of 2005 in A.P.No.123 of 2000 on the file of the I Additional District Court, Erode and to set aside the same.

For Appellants in all Appeals : Mr.S.Parthasarathy Senior Counsel for Mr.N.Damodaran

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For R1 in all Appeals : Mr.S.Sriram for Mr.Govi Ganesan For RR 2 to 4 in all Appeals : Mr.M.Guruprasad

For R5 in all Appeals : Not ready in notice

COMMON JUDGMENT

All these civil miscellaneous appeals arise on common facts and

also common order, challenging the common fair and decreetal order dated

15.03.2016. The appellants challenge the judgment dated 15.03.2016 mainly

on the ground that there was no proper adjudication of the issues by the trial

Court under Order 21 Rule 58 CPC.

2. In view of the fact that the appellants are third parties to the

arbitral proceedings as well as the execution proceedings, the learned Senior

Counsel appearing on behalf of the appellants is of an opinion that Order 21

Rule 58 CPC provides adjudication of claims to or objections to attachment

of property. Thus, when a third party files an application under Order 21

Rule 58 CPC, the Court can go into the facts and circumstances and

adjudicate the disputes raised by the petitioners/appellants in the present

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appeals. The appellants are no way connected with the arbitral proceedings.

They are the bonafide purchasers of the property through a sale deed dated

25.08.2001 from one Kumaravel, 4th respondent in the present appeals.

Kumaravel (R4) acquired the right of the property from one late

K.V.Laxmanan, who is the father of Kumaravel (R4).

3. The learned Senior Counsel appearing on behalf of the

appellants further contended that this aspect regarding the title of

Kumaravel (R4) has not been adjudicated by the trial Court and therefore,

the trial Court has passed an order not in consonance with the principles

under Order 21 Rule 58 CPC. In view of the fact that the title of Kumaravel

(R4) with reference to the property sold to the petitioners/appellants was not

adjudicated by the trial Court, the rights of the appellants are deprived and

the trial Court proceeded based on the arbitral award and based on the

attachment proceedings, which is insufficient to decide the issues involved

in the attachment proceedings. Therefore, the proceedings before the trial

Court is improper and cannot be construed as complete adjudication within

the meaning of Order 21 Rule 58 CPC and thus, the order is liable to be set

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aside.

4. The Executing Court has not given any definite finding with

regard to the title, interest and possession of the appellants as claimed by

them based on the sale deed dated 25.08.2001, through which, the

appellants purchased the property from Kumaravel (R4). Even before the

arbitration proceedings, these aspects were not adjudicated. More

specifically, the power of mortgage as well as the rights of the first

respondent were also not considered by the Executing Court. Thus, the

Executing Court has committed a serious error in not adjudicating these

issues despite the fact that the Courts are empowered to adjudicate under

Order 21 Rule 58 CPC. It is contended that the vendor of the appellants

acquired the property in question by virtue of a valid and true Will dated

25.09.1989 marked as Exs-P2 and P38 executed by his maternal

grandmother one Karuppayiammal, who became the owner of the subject

property due to the death of her husband R.A.N.Angappa Mudaliar and by

virtue of oral partition entered into between her and her daughter, who is the

third respondent in the present appeals. As far the appellants are concerned,

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they are the bonafide purchasers and therefore, the title of the appellants is

necessarily to be adjudicated in order to ascertain the validity of the

mortgage and as well as the consequential adjudication. In the absence of

adjudicating these vital factors, the proceedings under Order 21 Rule 58

CPC is insufficient and therefore, the order in question is liable to be set

aside.

5. The learned Senior Counsel appearing on behalf of the

appellants solicited the attention of this Court with reference to the findings

of the judgment dated 15.03.2016 and contended that the adjudication

regarding the title of the subject property is totally missing and no

adjudication was done. Thus, the judgment and decree are liable to be

scrapped.

6. The learned counsel appearing on behalf of the first respondent

disputed the said contentions and stated that the actions of Kumaravel (R4)

are doubtful and further, the sale was done in a collusive manner so as to

defeat the mortgage. The sale deed was executed in the year 2001 and

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during the relevant point of time, the arbitration proceedings was pending

and the appellants were parties to the arbitration proceedings. Therefore,

they cannot plead innocence regarding the pendency of the arbitration

proceedings and therefore, the appellants have colluded with Kumaravel

(R4) in order to fructify the mortgage as well as the attachment proceedings

in order to defeat the interests of the first respondent.

7. The learned counsel for the first respondent reiterated that the

first respondent issued a notice in reference to the arbitration proceedings to

respondents 3 to 5 on 12.05.2000 and on 01.06.2000 initiated a proceedings

regarding the disputed claim against the respondents 3 to 5 in arbitration

proceedings in A.P.No.123 of 2000 in respect of the hire purchase

agreement dated 28.02.1997 entered into between the first respondent herein

and one M/s.Erode Rana Textiles Processors Private Limited as first

respondent, K.V.Laxmanan, as second respondent and Saroja as third

respondent, respectively, in the above A.P.No.123 of 2000. During the

pendency of the arbitration proceedings, the second respondent

K.V.Laxmanan died and thereafter, his legal representatives were impleaded

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as parties as 2(a), (b) and (c), who are the respondents 3 to 5 in the present

appeals. In the hire purchase agreement, the third respondent is a guarantor,

who is the widow of the deceased K.V.Laxmanan, who was the original 2nd

respondent in A.P.No.123 of 2000. The copies of all the documents shown

in the petition were sent to the learned counsel for the respondents 3 to 5

vide registered post with acknowledgement on 17.11.2000. On 25.05.2001,

the counter statement was received through courier by the Arbitrator and the

same was signed by the original second respondent K.V.Laxmanan and

Saroja, third respondent in A.P.No.123 of 2000. On 15.09.2001, the

Arbitrator passed a common order in A.P.Nos.123, 124, 228 and 2 of 2000

under Section 16 of the Arbitration and Conciliation Act, 1996, answering

all the preliminary objections raised against the respondents 3 to 5, holding

that the Arbitrator has got jurisdiction. The signed copy of the order in the

arbitration proceedings was sent to the respondents 3 to 5 by RPAD and the

same was returned with an endorsement “unclaimed”. On 15.10.2001,

notice under certificate of posting was sent to the learned counsel for the

respondents 3 to 5 regarding not claiming of the registered post. On

26.12.2001, written arguments were received through courier by the

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Arbitrator signed by one of the respondents. On 13.02.0002, notice under

certificate of posting was sent to the Advocates for the respondents 3 to 5

herein, regarding not claiming of the RPAD sent by the Arbitrator.

8. The respondents 3 to 5 never appeared before the Arbitrator

and even their advocates did not file any vakalat. The respondents 3 to 5

remained absent in spite of several notices sent on several occasions by the

Arbitrator. But, they were not set ex parte, because, the Arbitrator received

a counter statement and written arguments from respondents 3 to 5. The

details of the claim was made known to the respondents 3 to 5 in notice of

reference to arbitration (Ex-P3) in A.P.No.123 of 2000 and a copy of the

claim was sent along with notice. There was no reply for the aforesaid

notice of reference to arbitration (Ex-P3) in A.P.No.123 of 2000 from the

respondents 3 to 5 and their attitude in not claiming RPAD and not

appearing before the Arbitrator shows that the respondents 3 to 5 willingly

and deliberately avoided arbitration proceedings.

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9. In paragraph no.10 of the counter statement filed by the

respondents 3 to 5 in A.P.No.123 of 2000, they contended that they had

repaid the loan amount and thereby admitted the transaction. However, they

have not entered appearance not cross-examined the petitioner before the

arbitration proceedings, who is the first respondent in the present appeals.

After providing opportunity to all the respondents, the Arbitrator passed an

award on 02.05.2002 in A.P.No.123 of 2002 and the liability of the

respondents 3 to 5 is limited to the extent of assets, they inherited from the

original 2nd respondent late K.V.Laxmanan in A.P.No.123 of 2000.

Thereafter, E.P.No.8 of 2005 was filed before the District Court, Erode, to

execute the award passed in A.P.No.123 of 2000. On 28.03.2005, in

E.P.No.8 of 2005 notice along with the copy of execution petition was

served on the 4th respondent and the same was not claimed by the

respondents 2 and 5 and the cover was returned with an endorsement “Left”.

The 4th respondent filed a counter in E.P.No.8 of 2005 and the

respondents 2, 3 and 5 remained ex parte. In the counter filed by the 4th

respondent, it was stated that the schedule mentioned property is vague and

the same is sold to strangers and there is nothing to attach and sell. But the

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4th respondent never entered into the witness box nor produced any such

alleged sale deed standing in the name of strangers before the Arbitrator in

arbitration proceedings. In E.P.No.8 of 2005, the first respondent brought to

the notice of the Executing Court that the property under attachment

belonged to the 4th respondent, which was scheduled as “C” in the award

and there is no legal impediment for the same. Accordingly, on 23.11.2007,

the property was attached in E.P.No.8 of 2005.

10. On 10.01.2008, E.A.No.20 of 2008 in E.P.No.8 of 2005 was

filed by the appellants under Order 21 Rule 58 and 59 and Section 151 of

the CPC. The appellants in E.A.No.20 of 2008 stated that they have

purchased schedule mentioned property in E.P.No.8 of 2005 on 25.08.2001

from the 4th respondent and further stated that they are the rightful owners.

The issues with reference to the arbitration proceedings as well as the

attachment proceedings were considered by the I Additional District Court,

Erode, and the learned District Judge, passed a judgment rejecting the claim

of the appellants and therefore, the appellants filed the present appeals.

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11. The learned counsel for the first respondent reiterated that

the findings of the I Additional District Court, Erode, reveal that the entire

transaction was done with intent to defeat the rights of the first respondent

and further done with collusion by the appellants with Kumaravel (R4) in

order to fructify the arbitration award. The facts and circumstances were

known to the appellants even during the pendency of the arbitration

proceedings and the manner, in which, they have conducted the proceedings

itself is evident that they had knowledge about the arbitration proceedings

and further during the cross-examination, the appellants were unable to

establish that they were the bonafide purchasers of the “C” schedule

property that was awarded by the arbitration award. Therefore, the learned

District Judge considered various facts and circumstances as well as the

happenings in all the proceedings and arrived at a conclusion that the sale as

well as the purchase by the 4th respondent in favour of the appellants is

doubtful and therefore, they cannot be construed as bonafide purchasers as

they are unable to establish that they had no knowledge regarding the

arbitration proceedings or they have purchased the property for a

consideration and regarding the verification of title deeds also, they could

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not able to establish the facts.

12. In this regard, the learned counsel appearing on behalf of the

first respondent solicited the attention of this Court with reference to the

findings of the District Court in E.A. proceedings.

13. In E.A proceedings, while considering the brief facts

submitted by the appellants, the I Additional District Judge, Erode, made the

recordings, which reads as under:

“After the purchase dated 25.08.2001 by the petitioner the Advocate for the 1st respondent has given a notice in Dinamalar daily dated 05.01.2002 stating that the petition mentioned property has been mortgaged to M/s.ICDS Ltd. by L.Saroja. After coming to know the said notice in Dinamalar the petitioners herein have given a public notice on 11.04.2002 in Erode and Coimbatore editions of Malaimalar daily, in reply to the above said notice of 1st respondent's Advocate. Further the petitioners have also sent a copy of the publication in Malaimalar through their Advocate, the Advocate for the 1st respondent through

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registered post with acknowledgement due, and the same has been acknowledged. They are not parties either to the award proceedings or the Execution petition 8/2005 Te respondents came to know of the award and EP only on 23.11.2007, when attachment of the properties was made to their surprise. After making enquiries they filed copy application before this Court on 11.12.2007 and get copies on 14.03.2008.

Therefore, this claim petition and objection was no designedly on unnecessarily delay the property is to be sold on 20.03.2008.”

14. The counter statement filed by the first respondent was also

considered by the I Additional District Judge, Erode. Recording the

averments of the first respondent, the I Additional District Judge, Erode,

recorded the following statement of the first respondent, which is relevant:

“Thus, the 1st respondent herein is the mortgagee and is having 1st charge over the mortgaged properties. On 01.08.2000 K.V.lakshmanan the then Managing Director of the 2nd respondent Company shot himself with his gun in a suspicious circumstances and died on 03.08.2000. Therefore the 4th respondent

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became the Managing Director of the 2nd respondent Company. The 1st respondent is surprised ans shocked to know the 4th respondent herein had executed a sale deed with respect to the mortgaged properties which is offered as collateral security to the 1st respondent for a paltry sum of Rs.26,10,000/- in favour of the petitioners clandestinely on 25.08.2001 and the same was registered as Document No.2786/2001 it is stated that the grand mother of the 4th respondent Karupaiyammal i.e.mother of the 3rd respondent herein had executed a Will dated 25.09.1989 by which she bequeathed the entire mortgaged property in favour of the 4th respondent and thereby the 4th respondent became the absolute owner of the mortgaged property after the death of the said Karupaiyammal. The alleged sale deed it is stated that the entire sale consideration of Rs.26,10,000/- was adjusted towards the various outstanding amounts allegedly due to the concerns of the 5th respondent by the 2nd respondent company in business transactions.”

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15. The point for consideration is whether the petitioner is entitled to

maintain the claim application. The I Additional District Judge, Erode, made

the following findings elaborately considering the facts and evidences

produced by both the parties and the same reads as under:

“7. It is evident to show that the petitioner/3rd parties are the pendente lite purchaser of the petition mentioned property for which there is a Arbitration award passed on 04.05.2002 in Arbitration petition No.123/2000, which has marked as Ex-P.16 in respect of the petition mentioned property. R.1 as a petitioner in it against R2, R4, R5 as respondents in the said award and subsequently another award in Arbitration petition 11/2002. On go through the Ex.P.16, the present R4 S/o.Late Lakshmanan, who is the vendor of the petitioner/3 rd party who executed Ex.R22 sale deed in respect of the petition mentioned property in favour of the petitioner/3rd party concealing the Ex.P.16 Arbitration award which has been delivered on 04.05.2002 after participating the arbitration proceedings through their Erode Advocate on 25.01.2001 before the arbitrator and on the basis of Ex.P.16 award has been delivered. It clearly infer that the R4 who is the

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vendor of petitioner/3rd party has concealed the pendente lite of the arbitration proceedings i.e.A.P.No.124/2000 and executed Ex.R.22 sale deed in favour of the petitioner/3rd parties.

8. It is pertinent to be noted that as per the Doctrine of Transfer of Property Act “the Buyer” is beware in respect of the property who likes to purchase, could know about the title and also to ascertain whether it is free from all encumbrances after due verification. In these aspect the attention of this Court is drawn with the evidence of P.W.1 in his cross-examination he admits that he never seen that antecedent document of the schedule property and also admits that he never produced any document to show to obtain the antecedent title deed of the petition mentioned property from his vendor and also admits that he never issued any notice to the vendor R4 to submit the antecedent title deeds for the petition mentioned property. Further, he admtis that he doesn't know how much sale price amount has been paid by him for Ex.P.1 to the vendor R4. Further, he admits that he never seen the antecedent title deeds of the petition mentioned property from the date of purchase in the year of 2001 to till date. In further he admits that he never meet his vendor R4 in person and asked him to produce the

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antecedent title deeds of the schedule property. Further he admits that the recitals found in the Ex.P.1 regarding the handed over of the original title deed dated 31.08.1951 to the vendee by the vendor is a false one. Further he admits that he never produced the Court order in respect of the will deed cited in the Ex.P.1 before the Court. Further he admits that he under valued the petition mentioned property to the tune of Rs.1.5 lakhs. Further he admits that he never paid the sale price amount either in cash or in cheque to the vendor R4. The above said admissions would clearly shows that the Ex.P.1 is being executed by the vendor R4 in favour of the petitioner/3rd parties in order to defeat the R1 to enjoy the fruits of the Ex.P.16 after participating the proceedings of the same.”

16. This Court is of the considered opinion that the findings of

the I Additional District Court, Erode, is crystal clear regarding the

admissions made by Senguttuvan (PW1), first appellant herein, in his cross-

examination. He admits that he has never seen the antecedent document of

the schedule property and further admits that he never produced any

documents to show to obtain the antecedent title deed of the petition

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mentioned property from his vendor. The first appellant further admits that

he does not know how much sale price amount has been paid by him for Ex-

P1 sale deed to the vendor Kumaravel (R4). Interestingly, the first appellant

admits that he never met his vendor Kumaravel (R4) in person and asked

him to produce the antecedent title deeds of the schedule property. This

apart, the first appellant admits that he undervalued the petition mentioned

to the tune of Rs.1.5 lakhs. He admits that he never paid the entire sale price

amount either in cash or cheque to his vendor Kumaravel (R4).

17. The above categorical admissions of the first appellant

before the I Additional District Court, Erode, reveal that the appellants have

purchased the property without verifying any of the original documents or

demanding the vendor to produce all such documents for verification.

18. When the first appellant himself has admitted in the cross-

examination that he has purchased the property without verifying the

original documents thereof regarding the title documents and even the sale

consideration, the contention of the first appellant in the present appeal that

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the I Additional District Judge, Erode, has not adjudicated the title deeds

deserves no merit consideration. Adjudication of title deeds under Order 21

Rule 58 CPC could be considered, if the parties have raised an issue/dispute

with reference to the documents and evidence available. When the

appellants admit that they do not have even copies of title documents

regarding the purchase of the subject property in Ex-P1 and, further they

were not even aware of the sale consideration and, this apart, they had no

knowledge about any details regarding the antecedents of the property,

including the arbitration proceedings and other attachment proceedings,

there was no occasion for the I Additional District Judge, Erode, to go into

these disputes in the absence of raising such issue before the I Additional

District Court, Erode, by the appellants. Thus, when the appellants

themselves have not raised any issue before the I Additional District Court,

Erode, they cannot turn around and come before this Court and say that

these issues have not been adjudicated by the said Court. The very ground

raised in this regard that the E.A Court has got powers to adjudicate the title

deeds and the Court failed to adjudicate the same is unsustainable and such

argument deserves no merit consideration. Only if such issues are raised by

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the appellants, then alone, the Courts are expected to adjudicate the same.

Contrarily, when the appellants have admitted that they have not even asked

for the antecedent of the property that they have purchased, and they have

not even verified the original documents, one cannot expect the E.A Court

to adjudicate the said issue. Such issues raised in this regard certainly are

untenable.

19. This Court is of an opinion that the first respondent is the

creditor and admittedly late K.V.Lakshmanan, who was the owner of

M/s.Erode Rana Textile Processors Private Limited, borrowed loan and not

repaid the amount and became defaulter and thus, the first respondent

initiated proceedings for arbitration and the Arbitrator adjudicated the

issues. Even the vendor of the appellants is also party to the arbitration

proceedings. When the vendor Kumaravel (R4) is also party to the

arbitration proceedings and knowing the pendency of the arbitration

proceedings, he executed the sale deed in favour of the appellants in the

year 2001. This Court can draw a factual inference that such registration is

done in order to defeat the rights of the first respondent to attach the

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property which stands in the name of Lakshmanan. As rightfully pointed out

by the trial Court, it is a pendente lite purchase and such a purchase cannot

bind the creditor and therefore, any documents created during the pendency

of such proceedings and more specifically when the vendor is the party to

such proceedings, there is no reason to believe that the appellants had

purchased the pendente lite property and therefore, the said sale would not

confer any right on the appellants to claim title or otherwise. However, the

appellants themselves have admitted that they have not even claimed for

antecedents of the property in subject and they have not verified the title

deeds regarding the subject mentioned property. This being the strange

admission of the first appellant during his cross-examination before the E.A

Court, the ground raised in the present appeals cannot be taken into

consideration for the purpose of granting relief.

20. The E.A Court arrived at a conclusion that the appellants

herein have not established that they are the bonafide purchasers and

accordingly, this Court drawn a factual inference that knowing the pendency

of the attachment proceedings they have executed a sale deed and therefore,

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they are not entitled to the relief and such execution of sale deed to defeat

the right of the creditor/first respondent is untenable.

21. The learned counsel for the first respondent made a

submission that the respondents 2 to 5 had successfully prolonged the

litigation for fifteen years and the first respondent creditor is not able to

realize the loan amounts so far. The properties attached are unable to be

brought for sale on account of continuous litigation at the instance of

respondents 2 to 5. In view of the fact that there is a delay of fifteen years,

this Court is inclined to direct the trial Court to execute the fair and

decreetal order in E.P. proceedings within a period of six months from the

date of receipt of a copy of this order.

This Court is of the considered opinion that the grounds raised in the

present appeals deserve no merit consideration as this Court does not find

any perversity or infirmity as such in respect of the findings recorded as

well as the decision arrived. Accordingly, the common judgement and

decree dated 15.03.2016 passed in E.A.Nos.16 to 20 of 2008 in E.P.Nos.4 to

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8 of 2005 in A.P.Nos.123, 124 & 228 of 2000, 2 of 2001 and 11 of 2002,

stands confirmed. As a sequel, these civil miscellaneous appeals are

dismissed. No costs. Connected C.M.Ps. are closed.

17.02.2021

Index: Yes nsd

To

1.The I Additional District Judge, Erode.

2.The District Judge, Erode.

3.The Arbitrator, Udupi.

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S.M.SUBRAMANIAM, J.

nsd

C.M.A.Nos.1146 to 1150 of 2016

17.02.2021

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