* IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision:
7. h 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 + EX.P. 96/2008, EA No.189/2008, EA No.145/2014 (of UPFC u/O21R-58), EA No.75/2014 (of the Judgment Debtor u/O21R-58) & EA No.34/2014 (of the decree holder u/S151CPC). 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/S151CPC), 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) ITR220 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 AIR2001Delhi 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 AIR1958Madras 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 AIR1951Allahabad 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 AIR1962SC527did 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 SCC791where 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. AIR1981Calcutta 404 (DB); Angu Pillai Vs. M.S.M. Kasiviswanathan Chettiar AIR1974Madras 16 (DB); Miss J.J.
Villa Vs. C.A. Petley AIR1934Rangoon 51; and, Syndicate Bank Vs. Estate Officer & Manager, APIIC Ltd. (2007) 8 SCC361 in support of the contention that equitable mortgage can be created by deposit of Agreement to Sell, possession memo etc.; (b) Rachpal Vs. Bhagwandas AIR1950SC272 Deb Dutt Seal Vs. Raman Lal Phumra AIR1970SC659 United Bank of India Ltd. Vs. Messrs Lekharam Sonaram and Co. AIR1965SC1591 Parkash Dev Chopra Vs. The New Bank of India Ltd., New Delhi AIR1968Delhi 244 (DB), Kakoo Shah Uttam Chand Vs. Kamla Wati AIR1969Delhi 120 and Sir Hari Shankar Paul Vs. Kedar Nath Saha AIR1939Privy 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 AIR1973Mysore 310 (DB) and Sunil Kumar Singh Vs. Life Insurance Corporation of India AIR1976Calcutta 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 AIR2012SC206 Rambaran Prosad Vs. Ram Mohit Hazra AIR1967SC744and Narandas Karsondas Vs. S.A. Kamtam AIR1977SC774 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 AIR2008SC2699to 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 AIR2010SC266to 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 SCC121to 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.
23. I am therefore of the view that even on the facts and circumstances, no case for continuing the stay is made out.
24. The ex-parte ad-interim order dated 14th September, 1998 which has not been confirmed till now, is thus vacated and IA No.7948/1998 is dismissed and IA No.11037/2007 is allowed.
25. Resultantly, the application of UPFC for impleadment in this suit, being IA No.3952/2014 is dismissed as infructuous.
26. Axiomatically, I.A. No.6220/2014 of the plaintiff for impleadment of UPFC is also dismissed for the reason of being not accompanied with any application for amendment of the plaint and as per the averments in the existing plaint, UPFC being not found to be a necessary or proper party to the suit and also on the ground of laches. EX.P. 126/1997, CS(OS) 1112/1998 & EX.P. 96/2008 27. List CS(OS) No.1112/1998 & Ex.P. No.126/1997 before the Joint Registrar on 11th July, 2014, as already scheduled.
28. List Ex.P. No.96/2008 before the Joint Registrar on 23 rd May, 2014, as already scheduled. RAJIV SAHAI ENDLAW, J.
MAY07 2014 bs