Dhanraj Mills Pvt. Ltd. and anr. Vs. Global Trust Bank Ltd. and ors. - Court Judgment

A.B. Palkar, J.

1. Applicant No. 1 - Dhanraj Mills Pvt. Ltd. (D.M.L. for short) is a party notified under the provisions of Special Courts (TORTS) Act of 1992. Applicant No. 2 - Killick Financial Services Ltd. (K.F.S.L. for short) is a wholly owned subsidiary of respondent No. 3 - Killick Nixon Ltd. (K.N.L. or Killick for short). Respondent No. 1 - Global Trust Bank (G.T.B. for short) is a banking company. Respondent Nos. 3 to 15 are all judgment debtors of D.M.L. Decrees have been passed by this Court against these respondents by consent and the total amount payable under all these decrees is Rs. 50,10,65,560/-. Respondent Nos. 3 and 4 have guaranteed payment under all the decrees and defaults have been committed by respondent Nos. 3 to 15 in payment of decretal dues probably as they are all belonging to the group of K.N.L. Respondent Nos. 5 to 15 have filed various applications in this Court for reliefs specially for reduction of Interest in decrees passed against them and these applications are pending before this Court.

2. Sometime in November/December, 2000 K.F.S.L. and Vysya Bank Ltd. (V.B.L. for short) entered into an agreement whereby V.B.L. agreed to give a piece and parcel of land admeasuring 23,246 sq. meters situated at Chandivali, known as Killick Industrial Estate, for a period of 99 years on annual lease rent of Rs. 50,000/-. G.T.B. wanted to obtain sub-lease of this land from K.F.S.L. and pursuant to the proposal, negotiations took place and a Memorandum of Understanding was reached on 20.12.2000 whereby K.F.S.L. agreed to grant sub-lease for a period of 98 years in respect of the aforesaid land on an annual lease rent of Rs. 1 lakh along with a refundable interest free security deposit of Rs. 74 crores to be paid by G.T.B. to K.F.S.L. The lease was to commence not later than 30.4.2001. On the same day four other tripartite M.O.Us, were executed between K.F.S.L. and G.T.B. and some other companies, namely, K.N.L. Snowcem India Ltd., Sashak Noble Metals Ltd. and Triad Constructions Ltd. It was agreed that the proposed deposit of Rs. 74 crores payable by the G.T.B. was to be utilised in payment of various dues by these companies to G.T.B. which dues were settled amicably between the parties. It was one of the conditions of the M.O.U. that K.F.S.L. should obtain lease of the aforesaid land from V.B.L. on or before 10.1.2001 by securing a registered lease deed. This condition and certain other conditions of the M.O.U. were not fulfilled and the lease was obtained by K.F.S.L from V.B.L. on 28.9.2001. Thereafter on 29.9.2001 G.T.B. expressed desire to obtain sub-lease from K.F.S.L. and an agreement of sub-lease was entered into on that day (29.9.2001), whereby it was agreed that simultaneously on execution of the agreement of sub-lease, the G.T.B. shall place a refundable security deposit of Rs. 74 crores with K.F.S.L. It was also agreed that N.O.C. shall be obtained from the Competent Authority under the Income Tax Act on or before a particular date. TheM.O.Us. came to an end in view of the fact that the terms and conditions of the M.O.U. were not fulfilled as even the lease was not obtained by the K.F.S.L. from V.B.L. prior to the date stated in the M.O.U. and therefore, on execution of the agreement of sub-lease on 29.9.2001 it became the liability of the G.T.B. to advance Rs. 74 crores to K.F.S.L. by way of security deposit and K.F.S.L. became the creditor of G.T.B. for the aforesaid sum and as such it is entitled to utilise the said amount in the manner it likes. No provision was made in the agreement of sub-lease for the adjustment of Rs. 74 crores towards payment of liability of any of the other companies mentioned above, who were parties to the M.O.U. and therefore, according to K.F.S.L., G.T.B. having become debtor for the sum of Rs. 74 crores on execution of the sublease, it could direct G.T.B. to pay the amount as and when it desired. In fact since the amount was payable immediately on execution of agreement of sub-lease, and being security deposit, the payment should have been made forthwith on execution of the agreement, K.F.S.L. in good faith and under a bona fide belief that G.T.B. would pay the security deposit soon after execution of the agreement of sub-lease, acknowledged receipt of the said amount in advance by making a statement to that effect in clause 4.1 of the agreement of sub-lease. However, G.T.B. failed and neglected to pay the said security deposit and the amount remained outstanding.

3. The agreement is binding and enforceable. K.F.S.L. has become creditor of G.T.B. in respect of Rs. 74 crores. Thereafter since parent company of K.F.S.Li.e. K.N.L. was indebted to D.M.L. and was in need of money, it was agreed between K.F.S.L. and K.N.L. that K.F.S.L. would advance amount of Rs. 49.37 crores payable to D.M.L. by K.N.L. and K.N.L. called upon K.F.S.L. to give a mandate to its debtor G.T.B. to pay the aforesaid sum of Rs. 49.37 crores to the Custodian in discharge of the liability of K.N.L. towards the aforesaid decrees. It was agreed that the amount would be debited by K.F.S.L. to respondent No. 3 - K.N.L. as interest free loan and K.N.L. would give credit to K.F.S.L. for the same and it was further agreed that the manner and time table of repayment by K.N.L. would be finalised by negotiations inter se at some later date and the repayment would be either by actual payment or by merger of K.F.S.L. with K.N.L.

4. In pursuance of this arrangement arrived at between K.F.S.L. and K.N.L.. K.F.S.L. by letter dated 4.1.2002 through their Advocate gave mandate to G.T.B. to pay out of the security deposit of Rs. 74 crores a sum of Rs. 49.37 crores to D.M.L. by making payment to the custodian in the attached account of D.M.L. This payment was however subject to relief regarding concession in the rate of interest or the quantum being granted by this Court in pursuance of the applications filed by the respondents in this Court. Copies of the letter dated 4.1.2002 were addressed to the custodian. However, no reply was received to the mandate given to the G.T.B. and therefore, K.F.S.L. sent notice dated 10.1.2002 through their Advocate calling upon G.T.B. to pay interest on the sum of Rs. 49,37 crores at 24% per annum. G.T.B. not having made the payment in pursuance thereof, this application is filed on 11.1.2002 for recovery of the said amount from G.T.B.

5. According to K.F.S.L. the amount of Rs. 49.37 crores is now impressed with trust for the aforesaid liabilities to the custodian on behalf of D.M.L. and G.T.B. is bound to carry out the mandate and the trust and D.M.L. is entitled to this amount and has a right to recover the same to satisfy the aforesaid decrees and therefore, applicants have claimed a decree directing G.T.B. to pay Rs. 49.37 crores together with interest at 24% per annum from 10.1.2002 till payment to D.M.L. by depositing the same in the attached account with Bank of India, Stock Exchange Branch, bearing No. 4006 towards satisfaction of the decretal debts as indicated earlier.

6. On behalf of the G.T.B., which is the most affected and seriously contesting respondent, an affidavit-in reply is filed by N. Nacheppan, Chief Manager, Credit Management. In brief, the case of G.T.B. is that agreement of sub-lease dated 29.9.2001 is void and non-est. The said property is part of land which K.N.L. had reserved to itself and had right (or option) to repurchase it at any time within 7 years (extendable upto 10 years) from V.B.L. and V.B.L. was bound to reconvey the property on payment of consideration evidenced by the document. V.B.L. had also agreed not to dispose of or encumber the property during the period of subsistence of right of K.N.L. to buy-back. This right to buy back was released by deed dated 26.9.2001 confirming absolute ownership of V.B.L. and releasing it from obligation of reconveyance contained in the deed and pursuant to the said release and in consideration thereof, V.B.L. granted lease for a period of 99 years to K.F.S.L. which K.F.S.L. was to further sub-lease to G.T.B. for a period of 98 years. After entering into agreement of sub-lease a notice dated 28.11.2001 was received by G.T.B. from the office of the Custodian (respondent No. 2) informing the Bank inter alia that by an order dated 18.8.2001 this Court had restrained K.N.L. and other group companies who were respondents in other petitions from disposing of their assets including shares pending further orders of the Court except in the usual course of business. The deed of release having been executed after the order dated 18.8.2001 was in violation of the Court's order and the lease dated 28.9.2001 in favour of K.F.S.L. by V.B.L. was consequent to and in consideration of the deed of release executed by K.N.L. A resolution dated 5.3.2001 was passed by the Board of Directors of V.B.L. This resolution clearly states that the proposed lease of the property to K.N.L. or it nominees is in lieu of K.N.L. agreeing to cancel the provision of buy-back. The deed of release is in violation of the Court's order and consequently the lease dated 28.9.2001 by V.B.L. in favour of K.F.S.L. is also void. It does not. create any right in favour of the K.F.S.L. and therefore, G.T.B. informed through the letter of their Advocate which was delivered on 14.1.2001 to applicant No. 2 K.F.S.L. to obtain permission/modification or clarification of the order dated 18.8.2001 from this Court so as to enable respondent No. 1 (G.T.B.) to complete the transaction as specified in the M.O.U. It was made clear that on failure to obtain required modification or clarification from the Court, G.T.B. would be constrained to terminate agreement of lease dated 29.9.2001. Inspite of this no application was moved either by K.F.S.L. or by K.N.L. or any clarification or modification was sought and in the circumstances, G.T.B. claims that the said sublease is void and non-est. This agreement of sub-lease is also based on fraudulent representation that K.F.S.L. has the requisite right, title or interest to grant sub-lease.

7. Under clause 8.11 the grant of sub-lease was subject to the condition of the Appropriate Authority not making an order under Section 269UD(1) of the Income Tax Act for acquisition of the said property and K.F.S.L. obtaining necessary approvals from different authorities. According to Clause 8.2 in case the different conditions set out in 8.1 are not fulfilled or complied with on or before 28.2.2002 then notwithstanding anything contained in the agreement to the contrary, the agreement shall not come into force and in case it is deemed to have come into force it shall stand terminated and the parties would be discharged of their respective obligations. After the sub-lease agreement, parties applied for no objection under the Income Tax Act. However, by letter dated 6.12.2001, the Appropriate Authority called upon to make certain clarifications and to rectify defects within 15 days. Thereafter by order dated 9.1,2002 the Appropriate Authority under the Income Tax Act held that Form 37-1 filed by applicant No. 2 was invalid and as such K.F.S.L. had failed to obtain necessary permission from the Competent Authority under the Income Tax Act.

8. It, is further averred to G.T.B. that it had extended certain facilities to the companies associated with K.F.S.L. and K.N.L. namely Snowcem India Ltd., Sashak Noble Metals Ltd., Triad Construction Pvt. Ltd., Anand Shree Leasing and Construction Pvt. Ltd. as well as K.N.L. and the borrowers had committed defaults in various repayments. Various amounts were due and payable by these entities to G.T.B. under the respective credit facilities. There were negotiations for settlement and as a part of one time settlement, it was agreed that the said property which was to be taken on lease by the K.F.S.L. from V.B.L. would be sub-let to G.T.B. The amount of Rs. 74 crores which was to be security deposit for the sub-lease was to be adjusted/appropriated by G.T.B. to liquidate the dues payable by respondent No. 3 - K.N.L. and other entities namely Snowcem India Ltd., Sashak Noble Metals Ltd., and Triad Construction Pvt. Ltd., etc. The M.O.Us. dated 20.12.2000 were made subject to conditions of K.F.S.L. getting the lease of the property from V.B.L. on or about 10.1.2001. This obtaining of sub-lease of property by G.T.B. from K.F.S.L. was a part of the similar other transactions between G.T.B. and other companies including the third respondent K.N.L. K.F.S.L. could get the lease of the property from V.B.L. on 28.9.2001 and immediately thereafter sub-lease in favour of G.T.B. was entered into on the next dayi.e. 29.9.2001. Thus the consideration of entering not sub-lease was the security deposit of Rs. 74 crores being appropriated in accordance with the M.O.U. Time limit specified was for the benefit of G.T.B. since it was part of one time settlement and G.T.B. wanted that dues of different entities be liquidated as early as possible. Therefore, M.O.Us, were renewed or extended with understanding agreed between the parties while entering into the sub-lease agreement that appropriation as agreed in the M.O.Us. shall be honoured and implemented. Time limit mentioned in the M.O.Us. was extended by mutual understanding and therefore, it is not now open to K.F.S.L. to contend that since time set out in the M.O.Us, expired, G.T.B. is liable to pay security deposit of Rs. 74 crores instead of appropriating the same in accordance with the M.O.Us. In case of a similar transaction between the G.T.B. and K.N.L., there was also M.O.U. entered into on the same day i.e. 20.12.2000 for purchase of land by G.T.B. and the consideration was to be appropriated to liquidate the dues of K.N.L. and in that case also the M.O.U. provided that the sale deed should be executed by 30.12.2000. The agreement of sale in that case was also executed on 11.1.2001 i.e. after the period specified in the M.O.U. The date for execution of the conveyance as per that agreement was 15.3.2001 whereas the conveyance was executed on 1.6.2001, despite the expiry of the time specified in the M.O.U. and the appropriation as agreed upon was duly honoured and implemented and the sale consideration was duly appropriated as agreed in the M.O.U. Similar is the case of one other company of K.N.L., namely Millennium Caribonum Ltd., hung common directors which had given corporate guarantee and had mortgaged property in favour of G.T.B. to secure certain facilities to Anand-Shree Leasing & construction Pvt. Ltd. In this case also mortgaged property was agreed to be purchased and purchase consideration was to be adjusted towards dues payable to G.T.B. and conveyance was to be executed and lodged for registration was so executed after the date specified in the agreement for sale. However, the amount payable for the purchase of the said property was duly adjusted as agreed.

9. Thus G.T.B. had no obligation to pay nor is otherwise liable to pay the amount of Rs. 74 crores a part of which is claimed in the present application. The issues regarding validity and enforceability or otherwise of the agreement of sub-lease are issues between K.F.S.L. and G.T.B. having no concern with the notified party and can be decided by appropriate Civil Court and not by the Special Court. Thus the amount of Rs. 74 crores was not payable immediately on execution of the agreement of sub-lease as contended but was to be adjusted towards the liabilities of the different entities.

10. The internal arrangement between D.M.L., K.F.S.L. and K.N.L. is not known to G.T.B. In any event any such arrangement is not binding on it and K.F.S.L. has no authority to issue any mandate as is claimed by them by letter dated 4.1.2002 and as such the mandate is not binding on the G.T.B. This mandate does not in any case constitute or create any privity of contract between D.M.L. and G.T.B. and on the contrary the right of K.F.S.L. to receive amount from respondents is conditional upon the agreement of sub-lease becoming binding and enforceable. G.T.B. is therefore not bound and liable to pay Rs. 74 crores and the application is liable to be dismissed. Moreover this Court has no jurisdiction as notified party is not at all involved in any of these transactions.

11. On behalf of respondent No. 3 K.N.L. an affidavit supporting the application is filed. Even thereafter affidavits-in-rejoinder and sur-rejoinder are filed and reference would be made to them if and when necessary.

12. Earlier the Custodian did not file any affidavit. However, at the stage of argument the learned Counsel for the Custodian raised certain points regarding the nature of transactions evidenced by the indenture of sale between V.B.L. and K.N.L. and objection was raised on behalf of the applicants and respondent No. 3 that the custodian cannot raise such points atleast without filing any affidavit. Thereafter an affidavit was filed on behalf of the Custodian by the Officer on Special Duty. In this affidavit, it is stated that the transactions now revealed, particularly between respondent No. 3 - K.N.L. and V.B.L. are under investigation of the Custodian. They require some detailed probe. However, a mere perusal of the document shows that it was in violation of the Court's order including order of 14.10.1999 passed in Misc. Petition No. 44 of 1999 and order of 18.8.2001. The conduct of the Applicant and Respondent Nos. 3 to 15 exposes their repeated attempts to frustrate recovery of money due as per the consent decrees passed against respondent Nos. 3 to 15 and the Custodian has also provided a datewise chart of various developments since the filing of the said petitions. D.M.L. has a significant share holding in K.N.L. and has misutilised assets of K.N.L. in an attempt to discharge debts of third parties. The transaction of 26.4.2000 between V.B.L. and K.N.L. is in the nature of mortgage by conditional sale. Respondent No. 3 was not entitled to release any of its rights thereunder and as such order of 18.8.2001 is violated.

13. The Indenture of sale dated 26.4.2000, the release deed dated 27.9.2001 and board resolution of V.B.L. dated 5.3.2001 on a proper construction reveal the real nature of the second part of the transaction. It reveals that in the settlement V.B.L. would get absolute right to 49,911 sq. meters of land and about 23,000 sq. meters of land would be returned to K.N.L. on lease. Thus on a proper construction of all the documents, the lease deed between V.B.L.and K.F.S.L. dated 29.9.2001 is nothing but a surrender or release of property rights by K.N.L. which is clearly in violation of the order of 18.8.2001 Thus all the transactions subsequent to order of 18.8.2001 are void. Respondent No. 2 is entitled to execute the decrees against all the properties of K.N.L. including the property in respect of which rights are created in favour of the 2nd applicant K.F.S.L.

14. Before proceeding to consider the arguments, it is necessary to point out that although it is filed as a miscellaneous application as per the procedure evolved by this Court, the prayers made in the application clearly indicate that it is nothing short, of a suit claiming a decree of Rs. 49.77 crores calling upon the 1st Respondent - G.T.B. to pay the amount to the Custodian for satisfaction of decrees passed against respondent Nos. 3 to 15. It was specifically conceded before me that D.M.L. has 33% stake in the K.N.L. and it is the case of the applicant that K.F.S.L. is a wholly owned subsidiary of K.N.L. The other respondents and certain other parties to which reference has come in the above statement of facts are all group companies and the third respondent K.N.L.

15. No oral evidence has been led and none of the parties expressed desire to lead any oral evidence. Copies of documents which are produced on record by respective parties are not in dispute. The matter was heard on the basis of the documents and the affidavits. I would first refer in brief to the arguments advanced by the parties. A detailed reference to the arguments would be made at a later stage as and when a particular point is being discussed.

16. On behalf of the applicants Mr. S.D. Parekh, learned Senior Counsel contended that all the M.O.Us. came to an end as conditions mentioned in the M.O.Us. were not fulfilled. In view of this the statement in the M.O.U. pertaining to the payment made to the G.T.B. by various parties and the grant of sub-lease in lieu thereof also comes to an end and the agreement of sub-lease is an independent agreement not at all concerned with the earlier M.O.Us. The agreement of sub-lease in categorical terms says that on execution Rs. 74 crores are to be paid by G.T.B. to K.F.S.L. which is to be treated as interest free security deposit liable to be refunded if for any reason it is found at some later stage that sub-lease cannot be executed and the contract cannot be performed by K.F.S.L. as per the agreement. The fact that the amount was so payable is also evidenced by the statement in the agreement which amounts to receipt of money and in fact on execution of such receipt, G.T.B. should not have delayed payment but has avoided payment for considerable period and therefore, this application was required to be filed. The fact that the amount becomes payable forthwith or simultaneously on execution of the sub-lease agreement clearly indicates that it would become a debt due to K.F.S.L. from G.T.B. and therefore K.F.S.L. had authority to assign this debt. The case of the said amount being impressed with trust has been specifically given up during the course of arguments and it is contended that the mandate issued by K.F.S.L. to G.T.B. to make payment of Rs. 49.37 crores in satisfaction of the decrees of K.N.L. group companies (respondent Nos. 3 to 15) by depositing the amount in the attached account of D.M.L., this amounts to assignment of the debt in equity to K.N.L. and as such there is an equitable assignment in favour of K.N.L. under which the mandate is to make payment to the custodian for and on behalf of the D.M.L.D.M.L. being a notified party this Court alone has jurisdiction to entertain this application. G.T.B. is guilty of suppression of material document namely letter dated 11.1.2002. This letter no doubt came on record at a larger stage, but it was however contended that suppression of this material document and taking a stand contrary to the contents thereof shows that it was intentionally suppressed and such suppression amounts to contempt. If the contract is voidable and inspite of opportunity to avoid it, it is accepted and willingness to abide by it is shown, then it becomes binding and cannot be avoided thereafter. The arrangement between K.F.S.L. and K.N.L. clearly gives right to K.F.S.L. to call upon their debtors to make payment as per their directions. All the conditions mentioned in the agreement of sub-lease have been complied with atleast by the date the matter become ripe for hearing. When G.T.B. realised that K.F.S.L. would move the Special Court for relief and will not be required to go to Civil Court as D.M.L. is notified party, it has invented defences and has suppressed material documents and facts.

17. In the earlier reply sent to the custodian, G.T.B. has clearly taken a contrary stand and therefore, it is clear that the defence is raised in order to avoid payment. The role of the custodian does not appear to be plain and impartial. In fact Custodian should be interested in recovery of decretal dues of the notified party and it is difficult to appreciate why the custodian is taking a stand which will delay the execution.

18. Mr. S.H. Doctor, learned Counsel appearing for the respondent No. 3 supported the applicants and contended that the agreement of sale does not create any interest in the property and therefore, release of option to repurchase by K.N.L. is not in violation of order of 18.8.2001 and even otherwise it is an act done in usual course of business and not covered by the order. It is a commercial decision taken by a commercial concern. It was his contention that no case of mortgage is pleaded. The other party (V.B.L.) is not before the Court and the transaction between V.B.L. and K.F.S.L. cannot be commented upon in these proceedings.

19. On behalf of the custodian it was contended that the sale transaction between V.B.L. and K.N.L. is in fact a mortgage by conditional sale. The transactions between V.B.L. and K.N.L. are suspicious and the custodian is investigating the matter. The option to repurchase is to be considered along with the circumstances specially on the background of the minutes of the board meeting of V.B.L. dated 5.3.2000 and the subsequent grant of release by V.B.L. to K.F.S.L.

20. On behalf of the contesting respondent G.T.B. Mr. Janak Dwarkadas pressed three points. He contended that this Court has no jurisdiction as D.M.L. is not at all either necessary or proper party. No interest is created in favour of D.M.L. by the so called assignment. The case of equitable assignment is not pleaded. What is pleaded is that debt is impressed with trust and now a totally different case is made that it amounts to equitable assignment. (Advance notice given for raising that point is not disputed). The so called mandate does not create any equitable assignment. There is no question of contempt as the letter forming part of correspondence between the parties is on record. No stand contrary to the contents of that letter is taken. Letter is to be considered as sent to the custodian in reply to the query of the custodian wherein it was not necessary to disclose the entire stand of G.T.B against K.F.S.L. or K.N.L. If all the material documents, facts and circumstances are considered, it would be clear that giving up of option and the subsequent loss of lease hold property by K.N.L. and lease in favour of K.F.S.L. and sub-lease by K.F.S.L. are so inter linked that all the transactions have to be considered together, on the background of the minutes of the meeting of the board. Contempt, if any, is committed by the applicant by suppression of material facts and documents. The applicants have intentionally not disclosed how K.N.L, went out of picture and in its place its nominee or its own subsidiary company came in. The release deed cannot be read in isolation. The so called mandate is a well planned strategy to bring the matter to this Court. This Court would not get jurisdiction if D.M.L. is not a party and that is why it is brought in picture although no interest in its favour is created and there is no privity of contract with it. It is joined as applicant as it is a notified party. The real dispute is only between K.F.S.L. and G.T.B. The M.O.Us, got merged in the agreement of sub-lease. Application is also premature and legally untenable. The remedy of K.F.S.L. is to claim damages for breach or termination of agreement if it is wrongful. The amount of security deposit was to be adjusted on debts payable to G.T.B. by group companies and so receipt was acknowledged in the agreement.

21. In view of the arguments advanced, the following points arise for my determination and my findings thereon are noted below for the reasons that follow :

(1) Whether this Court has jurisdiction?

(2) Whether as per the agreement of sub-lease, simultaneously with the execution of the agreement, G.T.B. was liable to pay Rs. 74/- crores to K.F.S.L. as interest free security deposit?

Whether it is proved that by in the agreement, K.F.S.L. acknowledged receipt of Rs. 74 crores that it has received the amount but inspite of such a clause in the sub-lease agreement, G.T.B. failed to make payment and avoided to pay the same even thereafter?

(3) Whether liability to pay Rs. 74 crores as stated in the agreement makes G.T.B. a debtor of K.F.S.L.?

(4) What is the nature of liability of G.T.B.?

(5) Whether this right to recover Rs. 74 crores or claiming that amount from G.T.B. allegedly as a debt can be assigned and whether mandate contained in the letter dated 4.1.2002 amounts to equitable assignment?

(6) What is the nature of agreement between K.F.S.L. and K.N.L. evidenced by letter dated 1.1.2002?

(7) Whether the said assignment of debt in favour of K.N.L. creates any interest in the said debt in favour of D.M.L. or even K.N.L.?

(8) Whether the agreement of sub-lease is void and non est and consequently sub-lease is also void being in violation of injunction order passed by this Court on 18.8.2001?

(9) Whether there is suppression of material document on the part of G.T.B. amounting to contempt?

(10) What is legal position of D.M.L. vis-a-vis arrangement between K.F.S.L. and K.N.L.?

(11) Whether in these proceedings it is proper to decide the nature of transaction between V.B.L. and K.N.L. and whether the issues involved in this matter require the Court to go into the aspect of the nature of that transaction?

(12) Whether the application is premature as on the date of application K.F.S.L. was not in a position to grant sub-lease and to perform its part of the contract?

(13) Is the application intended to delay the execution and amount to abuse of the process of law?

If yes, what costs?

My findings on the above issues are as under :

(1) Yes.

(2) No.

(3) No.

(4) No liability to pay arises by mere signing of sub-lease agreement.

(5) The right to recover Rs. 74 crores, if any, is not a debt. It is not assignable and is not assigned in equity.

(6) It is an agreement to advance loan to K.N.L. by K.F.S.L.

(7) No.

(8) Yes.

(9) No.

(10) There is no privity of contract between D.M.L. and G.T.B. and D.M.L. has no cause of action against G.T.B.

(11) No.

(12) Yes.

(13) Yes. Cost as per final order.

22. Taking the issue of jurisdiction first it is necessary to point out that detailed arguments were advanced on behalf of the Applicants specially with reference to Section 9A of the Special Courts Act and that also with special reference to the terminology 'in relation to any matter or claim'. At the outset it needs to be made clear that it is an established principle of law that jurisdiction is to be decided on the basis of averments in the plaint. In the present case D.M.L. is a notified party. It cannot file an application or suit anywhere else. Even if it is found that its joinder to the application is superfluous or unnecessary I do not think that it will be a ground for holding that this Court has no jurisdiction. The Court does not advise a party as to how it should frame the application and as to how it should plead. If the pleadings of the Applicants are such that the Special Court alone can take cognizance then there is no alternative than to hold that this Court has jurisdiction. In view of the fact that I am not taking a view contrary to the applicants' contention that this Court has jurisdiction and I am in fact following the interpretation put by the various rulings relied upon by the Applicants wherein the term 'in relation to', 'relating to' and 'in connection with' are interpreted by various courts, I am not referring to those judgments.

23. The contention of the learned Counsel for respondent is that Dhanraj Mill has unnecessarily been joined. It is at the most a beneficiary having no interest in the debt. There is no privity of con tract between G.T.B. and D.M.L. K.F.S.L. alone cannot present such an application and so D.M.L. has been joined in the application as Applicant No. 1 only in order to bring the matter to the Special Court. Joinder of D.M.L. is with a view to ousting the jurisdiction of the Civil Court. The learned Counsel relied on the judgment of the Supreme Court in Raizada Topandas v. Gorakhram Gokalchand : [1964]3SCR214 . In this case plaintiff had filed suit in the City Civil Court Bombay asking for declaration that the defendants are not entitled to enter into, or remain, in possession of a certain shop in Greater Bombay and consequently for a permanent injunction. It was filed on allegation that the Defendants were granted licence to use the shop of which the plaintiffs were tenants. The defence was that the shop had been sub-let to the defendants. It was held that the suit was not within the exclusive jurisdiction of the Court of Small Causes, Bombay. The learned Counsel contended that even though D.M.L. is a notified party, the Court should enquire whether in fact is has any interest in the lis and if it is in fact not properly joined as applicant and is not in a position to claim any relief in respect of the amount of Rs. 49.37 crores claimed in the application then the enquiry should stop at that stage. I am unable to accept this argument for the simple reason that even if the Court comes to that conclusion, the Court cannot on that finding alone dispose of the application, without recording finding on other issues after having heard the matter on all issues. Parties are not heard only on the issue of jurisdiction after framing it as a preliminary issue. The notified party cannot approach any other Court arid of necessity must move this Court. Therefore, if we consider the application as framed and the allegations contained therein, it leaves no room for doubt that this Court alone has jurisdiction to entertain the application and no other Court can entertain the application. Even otherwise if the application had been returned to the applicants where else it could be presented. It would amount of holding that D.M.L. is unnecessarily joined and therefore K.F.S.L. alone should approach the Civil Court. It is not possible to take recourse to this and therefore, I find that there is no substance in the argument of Mr. Janak Dwarkadas,

24. Before I proceed to consider the application and the points involved it is necessary to point out that during the course of argument, the learned Counsel for the Custodian made reference to indenture of sale between V.B.L. and K.N.L. dated 26.4.2000 and contended that it is not a sale deed, but a mortgage by conditional sale. It was pointed out to the learned Counsel that this controversy cannot be gone into in the present proceedings. Thereafter also arguments were advanced at length on the same point by the learned Counsel for Custodian and learned Counsel for K.N.L. and also by Mr. Janak Dwarkadas appearing for G.T.B. However, as I clearly pointed out during the course of argument to all the learned Counsel for the parties that I am not entering into that controversy firstly because V.B.L. is not a party and secondly because I have also rejected the application for amendment to join V.B.L. I did not find that V.B.L. is either necessary or even proper party in order to determine the controversy and decide the application. In order to decide the nature of transaction between the V.B.L. and K.N.L. one has to find out what was the intention of the parties while entering into the said transaction which on the face of it is described in no uncertain terms as a sale with option to repurchase in favour of K.N.L. The nature of transaction being a matter of intention of parties cannot, be decided in the absence of either party raising any controversy in respect of that transaction. K.N.L. which is a respondent in the present application has no where challenged the nature of that transaction. If the document clearly describes it as a sale deed and vendor wants to contend that it is not a sale but a mortgage then the contention may be raised by him and unless such a contention is raised by the vendor claiming that it is a mortgage, the Court cannot go into that aspect of the matter. The Custodian or G.T.B. not being parties to that document cannot assert any fact pertaining to the nature of that transaction and therefore, as indicated during the course of argument, I am not going into that aspect of the matter, I am accepting the document as styled and stated in clear words to be a sale deed with an option to repurchase in favour ofK.N.L.

25. The most material point that is required to be decided in this litigation is whether on execution of the agreement of sub-lease G.T.B. was liable to pay Rs. 74 crores to K.F.S.L. and whether in fact the payment was even acknowledged in the agreement of sub-lease by K.F.S.L. even though no payment was actually made and therefore, it was all the more necessary for G.T.B. to make the payment immediately or atleast within a reasonable time. In order to consider this we have to see the facts and circumstances in which the agreement of sub-lease came into existence.

26. On 20.12.2000 five M.O.Us. entered into. The most important of them is the one between G.T.B. and K.F.S.L. whereby K.F.S.L. agreed to grant sub-lease of 23,240 sq, meters of land to G.T.B. M.O.U. begins with a statement that K.F.S.L. is in the process of obtaining from V.B.L. a lease of the said piece of land for a period of 99 years which will also give power to K.F.S.L. to sub-lease the whole or part there of and K.F.S.L. has agreed to grant sub-lease to G.T.B. Clause 3.4 of the M.O.U. reads as under :

3.4. It is clarified that the period of sub-lease of the said land in favour of the Bank shall commence only on and after execution and registration of the Deed of Sub-Lease and not before.

Clause 4.1 of the M.O.U. reads as under :

4.1 This M.O.U. is subject to and conditional upon Killick Financial obtaining on or before 10th January, 2001 (time being the essence) from The Vysya Bank Limited a lease of the Schedule Property for a period of 99 years commencing from not later than 10th January, 2001 and further subject to the condition that the Lease Deed between The Vysya Bank Limited and Killick Financial is executed and Registered on or before 10th January, 2001, inter alia incorporating a covenant by The Vysya Bank Limited giving the right, power and authority to Killick Financial to sub-lease the whole or any portion of the property which is the subject oflease.It is pertinent to point out that this M.O.U. does not make any reference to anything due and payable to the Bank by any of the group company of K.N.L. obviously because it is an M.O.U. between G.T.B. and K.F.S.L. However, the other four M.O.Us are tripartite agreements of which one is between G.T.B., K.N.L. and K.F.S.L. Apart from compensation the M.O.U. states :

WHEREAS:

(a) Killick Financial is in the process of obtaining in its favour from The Vysya Bank Limited, a Lease of a piece and parcel of land of an extent of 23,246 sq. mtrs. or thereabout situated at Killick Estate, Baji Pasalkar Marg, Chandivli, Andheri (East), Mumbai 400 072 and more fully described in the Schedule hereunder and hereinafter called the 'Schedule Property' for a period of 99 years.

(b) The proposed lease will also give right, power and authority to Killick Financial to sub-lease the whole or any part of the Schedule property.

(c) Killick Financial has agreed to grant to the Bank a sub-lease of the Schedule property to be leased by The Vysya Bank Limited to Killick Financial.

(d) The parties are desirous of reducing to writing the terms agreed to between them in respect of the above sub-lease.

Similar terminology is used in all the M.O.Us. and the other parties are different group companies of K.N.L. All of them were indebted to G.T.B. and those debts running in crores of rupees were settled by these M.O.Us. The total settlement was of Rs. 59.66 crores. The sub-lease was to be given for adjustment of the liability. There is no denial of this adjustment of loans by G.T.B. and there is no contention or claim by any of the Company party to the M.O.U. that as K.F.S.L. could not obtain lease from V.B.L. on or about 10.1.2001, any of the party had any correspondence or otherwise offered to G.T.B. the said amount or any part thereof or even otherwise acknowledged that the amounts are still outstanding as they do not stand adjusted in the aforesaid circumstances. Therefore in a way all these companies which are group companies of K.N.L. have taken advantage of having settled their dues right on 20.12.2000 and till this date there is no claim by G.T.B. for the same against any of them and having taken this advantage, it is now being contended that the M.O.Us, have either expired or stand cancelled as time was the essence of the contract and before 10.1.2000 K.F.S.L. did not secure lease of the land from V.B.L.

27. Now this is to be appreciated in the light of the following facts. On 29.9.1999 there was an agreement between V.B.L. and K.N.L. A perusal of this agreement shows that V.B.L. had advanced to the companies, viz. Geekay Exim (India) Ltd., Sahara Impex Ltd., and Viplav Trading Ltd. (all group companies of K.N.L.) diverse facilities under which debtors owed different sums of money to the Bank and the repayment of the debt was guaranteed by deed of 26.12.1997 and an equitable mortgage by K.N.L. which has been referred to as Killick Guarantee to the extent of Rs. 100 crores. Similarly there was other guarantee of the same date known as Avanti Guarantee by Avanti Development Corporation, another group company of K.N.L. which was also secured by mortgage similar to Killick guarantee and the liability under that guarantee was Rs. 127.50 crores and by an agreement, the liability of all the debtors was crystalised to Rs. 130.58 crores. After adjustment of the amount of Rs. 75 lakhs due by Geekay Exim by pledge or purchase of pledged shares remaining balance of Rs. 129.83 crores was to be adjusted as below :

Clause 8, 9 & 10 show that Killick was to transfer property to the Bank and the Bank i. e, V.B.L. was to grant a lease to the Killick as per the draft lease deed of the same date. In pursuance of this agreement, indenture of sale was executed on 26.4.2000 and the property was transferred to V.B.L. and this sale deed gave an option to K.N.L. for re-purchase of property and clause 2.2.1 states the details of the different amounts payable in case of exercise of option at the end of a particular period. Clause 2.3 states that against payment of the amount as stated above by K.N.L. to the Bank, the Bank was to transfer the property in favour of K.N.L. This was an agreement by the Bank to execute a lease deed in terms of the draft approved by their Advocates in favour of Killick and the draft lease deed was initialed by the parties. Now the sale deed came to be executed on 26.4.2000 and the option to repurchases was given to K.N.L. Therefore, K.N.L. had a right to obtain lease of land admeasuring 49,911 sq. meters. It is an undisputed fact that K.N.L. released the right of repurchase by release deed dated 27.9.2001 and the lease deed in favour of K.N.L. never came to be executed. However, on 27.9.2001 itself the indenture of lease was executed by V.B.L. in favour of K.F.S.L. which is 100% subsidiary of K.N.L. and can be said to be a nominee of K.N.L. This lease was in respect of 23.246 sq. meters, of land and K.N.L. was to get lease for 49,911 sq. meters. K.N.L. gave up the option of repurchase and also gave up their right of obtaining a lease deed. Even after date of sale in favour of V.B.L. K.N.L. continued in possession. The possession did not change hands. Instead of obtaining a lease of the plot of land admeasuring 49,911 sq. meters, it obtained lease in favour of its nominee for 23,246 sq. meters. K.N.L. continued in possession as a lessee of the entire property after the sale deed in favour of V.B.L. and apart from what is stated in the document, it is clearly borne out from the affidavit of Aditya Goenka, Director K.N.L. dated 8.4.2000 wherein paragraphs 11, 12, and 13 it is clearly stated that K.N.L. was in arrears of rent for six months as on 28.11.2000. The release deed was executed on 27.9.2001 and the option to repurchase was available to K.N.L. only if it strictly and meticulously complied with the terms and conditions of the indenture of sale and it was obligation on the part of K.N.L. to take lease of the property for 7 years on the rentals mentioned therein. For the first five years rental was Rs. 4.8 crores per year and for the next year was Rs. 9.6 crores per year and the total rent payable would be Rs. 43.20 crores. On the date of deed of release K.N.L. was already in arrears not having paid the rent for 18 months amounting to Rs. 7.2 crores. What was done had the effect of giving up the land which K.N.L. was holding as a lessee. It is not material whether the lease deed was executed, registered or not. K.N.L. was in possession as a lessee land having an area of 49,911 sq. meters. That was given up and in turn a lease was obtained by K.F.S.L. for a lesser area of 23,246 sq. meters.

28. K.F.S.L. being fully owned by K.N.L. the lease was obtained in the name of K.F.S.L, In the process K.N.L lost lease hold property of more area and it remained with V.B.L. Here in lies the mischief. K.N.L. being bound by Court order dated 18.8.2001 could not transfer any property on 29.9.2001 and therefore, lease was obtained in favour of K.F.S.L. and sub-lease agreement was entered into by K.F.S.L. with G.T.B. It was therefore rightly pointed out by Mr. Janak Dwarkadas, learned Counsel for respondent No. 1 that an ingenuous devise was found by which K.N.L. went out and K.F.S.L. came in and thereafter the sub-lease was executed. In the process lease hold right of the remaining land was lost by K.N.L.

29. Coming back to the point that M.O.Us. expired because time was essence of contract, it is true that the lease was not obtained by K.F.S.L. on or before 10.1.2001. Reliance is placed by the learned Counsel for applicants on Section 35 of the Contract Act, according to which contingent contracts to do or not to do anything if a specified uncertain event happens within a fixed time, becomes void if, at the expiration of the time fixed, such event has not happened, or if, before the time fixed, such event becomes impossible. In my view this is not a case of contingent contract and on the contrary it is a case of time being essence of the contract which according to Section 55 of the Contract Act gives an option to the party when certain thing is to be done at or before specified time and the party fails to do it then the contract become voidable at the option of the other party. In this case if the lease was not obtained on or before 10.1.2001, then it was for the G.T.B. to avoid the contract on that ground. Section 35 of the Contract Act had no application. It refers to the happening of an event (specified uncertain). The obtaining of lease is not an event to happen. It is fulfilling a term of agreement by a particular date which can always be extended by the opposite party for whose benefit the date is fixed. The word 'event' used in Section 35 of the Contract Act is not an act to be performed by any party but an incident to happen.

30. Apart from this, so far as the consideration mentioned in the M.O.U. is concerned, the different parties to the M.O.Us. have already taken the benefit. Their liabilities have been adjusted. It is not known whether any concession was given to any of them but normally whenever there is settlement of liability in respect of loan by a Bank, some concession is given when there is one time settlement. Here obviously there was one time settlement of all dues of different companies and therefore, their liabilities were squared up and as earlier stated after this date none of them has even whispered anywhere or even by filing an affidavit that their liabilities are still existent to the extent to which they were prior to the date of adjustment with further interest and therefore, it is obvious K.N.L. and its group companies want to eat the cake and have it too. They went to take all the advantages of the M.O.Us. but at the same time want to contend that M.O.Us. have expired or become void and the agreement of sub-lease is an independent agreement not in any way concerned with the earlier M.O.Us. In my view as K.F.S.L. is 100% owned by K.N.L. this contention is raised through K.F.S.L. by K.N.L. and the group companies. It is thus clear that agreement of sub-lease is consequence of the M.O.Us and a sequel to the M.O.Us. and therefore, M.O.Us get merged in the agreement of sub-lease as rightly contended by the learned Counsel for respondent No. 1 Mr. Janak Dwarkadas.

31. This has to be considered on the background of the Minutes of the meeting of the Board of Directors of V.B.L. dated 5.3.2001. In respect of recovery of dues from Geekay Exim group account it was decided as part of one time settlement to lease out for a period of 99 years an area of 23,246 sq. meters of land out of 60,246 sq. meters to Killick or their nominees in lieu of Killick and Avanti agreeing for cancelling all the clauses in two registered sale deeds dated 26.4.2000 containing the provisions of buy-back and lease back of the entire land totally corresponding to 60,246 sq. meters. One of the clauses is to agree to reduction of lease rentals to 50,000 in respect of 23,246 sq. meters to be given on lease for 99 years to Killick or their nominees. Thus the lease in favour of K.F.S.L. was obtained in lieu of K.N.L. giving up not only the option to buy-back but also the lease of a considerably larger area. The minutes of the board meeting of K.N.L. dated 28.11.2000 are ingenuously worded and do not disclose the facts as appear in the affidavit of Aditya Goenka referred to above.

32. Let us consider the agreement of sub-lease as it is. This agreement dated 29.9.2001i.e. executed on the very next day on which K.F.S.L's lease deed by V.B.L. for 99 years was executed. Lease rental was agreed to be Rs. 50,000 only. This lease rent was to be paid by the G.T.B. directly to K.S.F.L. as per clause 3. Sub-lease was to commence on execution and registration of the deed of sub-lease. Possession of the land was to be delivered to the Bank only on execution and registration of deed of sublease. The most material term regarding the security deposit is in clause 4.1 which reads as under :

4.1 For the due observance, proper and timely performance and fulfillment of the terms and conditions of the said proposed Lease and all the covenants and obligations undertaken by the Bank under the provisions of said proposed lease (which terms, conditions and covenants are to be incorporated in the Deed of Sub-lease) the Bank shall place with K.F.S.L. simultaneously with the execution of this Agreement of refundable security deposit of Rs. 74,00,00,000/- (Rupees Seventy-four crores only) (hereinafter called the 'Security Deposit') (the receipt of which K.F.S.L. hereby acknowledges and acquits, releases and discharges the Bank from such payment or every part thereof). Subject to the provisions of the clause 8.2. herein, the security deposit shall be refunded by K.F.S.L. to the Bank on the expiry or sooner determination of the said proposed lease. The other terms and conditions governing the security deposit shall be incorporated in the Deed of Sub-lease.

The emphasis is led on the terminology that the bank shall place with K.F.S.L. simultaneously with the execution of this agreement a refundable security deposit of Rs. 74 crores (receipt of which K.F.S.L. hereby acknowledges and acquits, release and discharges the bank from such payment or every part thereof). (Underlining is mine) 'The argument is that though this receipt of Rs. 74 crores by way of security deposit was executed, as a matter of fact the amount was not received although it was payable simultaneously with the execution of the agreement i.e. on the very day. On behalf of the K.F.S.L. this agreement was signed by one of the Directors on 29.9.2001. The Applicants want the Court to believe that although the Director acknowledged the receipt of Rs. 74 crores, he left the place without getting any check or pay order for that amount from G.T.B. It is pertinent to point out that thereafter till 4.1.2002 there was not even a whisper from K.F.S.L. to the G.T.B. reminding them that though they have already passed a receipt, amount has not been paid. It is not a small amount. It is Rs. 74 crores. If one considers the interest to be charged at nominal rate of 10% per annum, the amount of interest cannot be said to be negligible. The sequence of events is that thereafter on 1.1..2002 there is an arrangement between K.F.S.L. and K.N.L. whereby K.F.S.L. agreed to advance loan to K.N.L. and K.N.L. then asked K.F.S.L. by letter dated 4.1.2002 to issue a mandate to G.T.B. directing the Bank to pay Rs. 49.37 crores out of Rs. 74 crores to the Custodian in the attached account of D.M.L. It is true that there is a clause in the sub-lease agreement itself whereby the security deposit is to be refunded in case finally the parties do not agree and the lease did not come into force. The term of security deposit in the agreement of sub-lease can be understood only with reference to the M.O.Us. To say that this has no concern with the M.O.Us, and the adjustment of debts therein is in my view a totally dishonest act on the part of the K.F.S.L. It is true that the agreement of sub-lease does not refer to M.O.Us. However, it has not come out of air. It has to be considered on the background of the M.O.Us, and once it is found that the consideration mentioned in the M.O.U. for taking property on sub-lease by G.T.B. was adjustment of debts due to it, then it is not possible to read the agreement in isolation by ignoring the M.O.U. totally. It is also necessary to consider that after the M.O.Us. came to an end as per the contentions of the applicant No. 2 and respondent No. 3, none of the parties have ever made any offer. The other parties to the tripartite M.O.Us. are not before the Court, even K.N.L. has not stated that at any time after the M.O.U. or after the agreement of sub-lease it had made any offer or even made enquiry from G.T.B. as to what is its liability if settlement arrived at has come to an end and therefore, even though the agreement of sub-lease uses the terminology simultaneously. That clause has to be read in the background alone and the word 'simultaneously' clearly indicates that as the amount was adjusted already as per the M.O.Us. it was taken as paid simultaneously and that explains the furtherpart... that K.F.S.L. acknowledges, acquits, releases and discharges the Bank (G.T.B.) of the liability. In any case the word simultaneously cannot be construed in any other manner.

33. It must also be borne in mind that G.T.B. was a creditor of K.N.L. and the other companies. Its anxiety was to recover loans and therefore, it came to some settlement with the parties and in terms agreed to accept a sub-lease. The consideration for the sub-lease was the adjustment of liabilities which the bank had agreed to treat as an interest free security deposit for a period of 98 years and therefore, the case made out that Rs. 74 crores become payable forthwith on execution of the agreement is on the face of it not only untenable but dishonest.

34. Another aspect of the matter is that as pointed out earlier the sublease was to commence only on execution and registration of deed of sublease. The sub lease is not to commence at once on execution of the agreement and therefore, if contention of the applicants is to be accepted, what is the consideration G.T.B. was getting, only a piece of paper termed as sub-lease agreement without even a document of deed of sub-lease much less possession of the land. To hold that G.T.B. was liable to pay Rs. 74 crores forthwith would mean that even without being assured of getting consideration for the same, it was liable to deposit that amount and if so, it does not explain as to what would happen to the dues which were outstanding towards K.N.L. and other group companies which were settled in consideration of sub-lease and therefore, the agreement of sub-lease can be understood properly only with reference to the M.O.U. and not otherwise. The M.O.Us. therefore get merged into the agreement of sub-lease and are neither cancelled nor get discharged. If in fact it were so, and the amount of Rs. 74 crores was to be paid irrespective of the adjustments as shown in the M.O.Us. and the same had not been paid, then it is not at all probable that K.F.S.L. would keep quiet. It is pertinent to point out that even a phone call is not alleged to have been made by K.F.S.L. or any of its Directors including the signatory to the agreement of sub-lease to the G.T.B. till the date of issuance of Mandate. The wording of the clause to the effect that K.F.S.L. acknowledges and acquits, releases, and discharges the Bank from any such payment or every part thereof, clearly shows that it was in lieu of dues of K.N.L. and other companies which were adjusted as stated in the M.O.Us. To accept any other interpretation of the agreement regarding liability to pay Rs. 74 crores would render this part of acknowledgment, receipt etc. wholly redundant, I am of the considered view that these words are intentionally used in view of the adjustment of liabilities as stated in the M.O.Us. In a commercial transaction it is unthinkable that after passing a receipt for a sum of Rs. 74 crores any party would keep quiet for more than three months if the amount remained to be paid.

35. There is one more aspect of this matter. On the date of execution of the agreement of sub-lease, admittedly K.F.S.L. was not in a position to grant lease. N.O.C. was to be secured from the Competent Authority under the Income Tax Act. At that time both the parties were under an impression that the N.O.C. would be required and therefore, clause 8.1.1 was introduced. When the very fact of getting the land on sub-lease i.e. consideration for which the Bank was to adjust Rs. 74 crores, was not possible to be complied with on that day, and it was not in hands of the parties whether it would be complied with as per the terms of sub-lease agreement, then it is highly improbable that the Bank would agree to pay Rs. 74 crores more merely for signing the agreement of sub-lease to be treated as a security deposit. It is not possible for me to accept the argument that even after adjustment of the dues by G.T.B., it was liable to pay Rs. 74 crores on execution of the agreement. Even on getting sub-lease and possession of land respondent No. 1 was not to pay anything more than adjustment that was already made, and that adjustment itself was to be treated as security deposit. On proper interpretation of the document, no other conclusion is possible and the claim made in the application that G.T.B. was liable to pay Rs. 74 crores forthwith on execution of the agreement of sub-lease is clearly unbelievable and is obviously a false and frivolous claim.

36. My further discussion is on the basis that even if it is found that the earlier finding on the second point is otherwise and the Bank was liable to pay Rs. 74 crores, on execution of the agreement even then the amount of Rs. 74 crores does not become a debt due from G.T.B to K.F.S.L.

37. There was agreement of sub-lease and according to the Applicants under the agreement Rs. 74 crores was payable on execution of the agreement. The amount was not paid. The question is what is the nature of the claim to that amount. It is an amount payable on the basis of an agreement of sub-lease. If payment as per the agreement is not made, there is a breach of agreement or breach of contract and such breach gives rise to a claim for damages. In this connection reliance is placed by Mr. Janak Dwarkadas on a judgment in the case of Union of India v. Raman Iron Foundary : [1974]3SCR556 and material part of para 9 of the said judgment reads thus :.Now the law is well settled that a claim for unliquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach become entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has is the right to sue for damages. That is not an actionable claim and this position is made amply clear by the amendment in Section 6(e) of the Transfer of Property Act, which provides that a mere right to sue for damages cannot be transferred. This has always been the law in England and as far back as 1858 we find it stated by Wightman, J., in Jones v. Thompson (1858) 27 L.J.Q.B. 234

Long back it was held in the case Hiranand v. Nemchand AIR 1923 Bom. 403 : 25 Bom. L.R. 445 : 73 I.C. 465 that right to claim damages for breach of contract cannot be transferred under Section 6(e), it being merely a right to sue and not an actionable claim as defined under Section 3 of the Act.

38. It was contended by the learned Counsel for respondent No. 1 that what the applicants are claiming is under an agreement of sub-lease and if an agreement of sale or agreement of lease or sub-lease is breached, or terminated, the right of the other party is to claim specific performance. The learned Counsel placed reliance on the judgment of the Full Bench of the Madras High Court in the case of N.M.S.S. Sabramanian Chettiar v. S.M.A.M. Arunachalam Chettiar AIR 1943 Mad. 761 Head noteB1 of the said Judgment reads as under:

(b) Specific Relief Act, (1877), Sections 12, 13 and 14 - Suit by vendor for recovery of consideration is suit for'specific performance.

A suit by the vendor for the recovery of the purchase consideration is a suit for specific performance. On the same principle a suit by a plaintiff for recovery of a sum to which he is entitled under a deed of release is also a suit for specific performance.

The logic is obvious. Whenever there is a breach of contract, the right to sue commences on the breach, and breach of contract is the cause of action. The time of performance of the contract may be at a future date, and after time fixed for performance or otherwise after passage of reasonable period a suit for specific performance can be filed then even a suit for refund of consideration can also be filed at the same time. The claim for refund of consideration, even if made, without making a claim for specific performance, it cannot be treated as a claim for recovery of money simpliciter for which cause of action is payment. Cause of action for claiming refund is the same and therefore, limitation starts running even for claiming refund from the date of breach of contract or after laps of such reasonable period on which, it could be expected of the other side to perform its part of the contract. Another aspect of this is that Applicants in this case are simply claiming a decree for money without even expressing that they were always ready and willing to perform their part of the contract, but the respondents have committed breach. When questioned about this, learned Counsel for applicants conceded that such pleading is not there. He however stated that he is ready to make a statement at the Bar and his clients are ready to file an affidavit. I do not think that such an affidavit or statement at the bar can be a substitute for pleading in the plaint. This would also show that the anxiety of the applicants is by hook or crook to get the money and if possible not to part with the property and on the contrary they would try their level best if at all they get an opportunity, to delay the delivery of property which is obvious from their conduct.

39. Thus even if the case of applicants that Rs. 74 crores were payable simultaneously on executing agreement and receipt thereof was acknowledged but G.T.B. failed to make the payment, that does not become a debt due from G.T.B. to K.F.S.L. No relationship as creditor and debtor is created. The only legal right arising in favour of K.F.S.L. is to claim either specific performance or refund of the said amount. The case of equitable assignments is to be considered with this background in mind.

40. In order to consider the argument of equitable assignment, it is necessary to point out that there is no pleading of equitable assignment. No doubt a notice in advance was given to respondent No. 1 that this point would be raised during the argument. However, in my view it is not sufficient especially because what is pleaded is that amount is impressed with trust. This case is given up and it is contended that the issuance of mandate by K.F.S.L. to G.T.B. amounts to an assignment in equity. The facts which make out the case of equitable assignment have to be clearly pleaded and in this case the pleading is that mandate was issued by K.F.S.L. and G.T.B. When one pleads a case of equitable assignment, he has to point out as to how it would become equitable assignment and how it gives right to the assignee to make a claim. Had equitable assignment been even in the mind of the Applicants to support their claim, then the application would not have been filed by the assignor and even if filed, the assignee would have been one of the co-applicant. The assignee according to the Applicants is not D.M.L., it is only a beneficiary. The assignee is K.N.L. and surprisingly enough K.N.L. does not approach the Court. When a particular debt is assigned, the assignor loses all interest in it and he also does not retain any legal right to sue on it. But even then he may be joined either as a plaintiff or a defendant. It is the assignee who gets the legal right and it is he who comes to the Court. This is of course in the normal course and therefore, in the normal course the assignee pleads as to how he is entitled to come to the Court as a claimant in place of the assignor who had a legal right and who assigned it to him.

41. In the light of this, let us examine the facts of the present case. The assignment is by arrangement between K. N.L. and K.F.S.L. which is arrived at on 1.1.2002. The arrangement as stated in the letter addressed by K.N.L. to K.F.S.L. is to the effect that as principle debtor and guarantor it is liable to pay to D.M.L. and the Custodian Rs. 49.37 crores as per the decrees, K.N.L. confirms the arrangement that K.F.S.L. will pay on behalf of K.N.L. to D.M.L. and the Custodian Rs. 49.37 crores out of the money receivable by K.F.S.L. from G.T.B. by giving a mandate to G.T.B. It is further states that this amount of Rs. 49.37 crores to be paid to the Custodian is to be treated by K.F.S.L. as interest free loan to K.N.L. and as regards repayment of the aforesaid debt due by them to K.F.S.L., the manner and time table for repayment, will be finalised by negotiations at a later date either by actual payment or by merger of K.F.S.L. into K.N.L. as K.F.S.L. Is a wholly owned subsidiary of K.N.L. Therefore, in substance K.N.L. is asking for a loan from K.F.S.L. For this loan there is no consideration. It is a loan to be advanced by K.F.S.L. as K.N.L. is indebted and is facing execution. So here is a debtor who is giving a direction to its creditor to give a mandate to the creditor's debtor to make payment to a third party to whom the debtor is indebted. It means, one debtor is to be satisfied and therefore, debt is claimed from other party. Thus, K.N.L. had absolutely no enforceable claim against K.F.S.L. Had K.F.S.L. been an independent entity or even if otherwise its Directors had taken a decision not to advance loan could K.N.L. force it to advance loan? Answer would be an emphatic 'No'. Therefore, I would streets the importance of pleading the case of equitable assignment. Had the case been pleaded, it would have been necessary for the Applicants to plead as to what is the relationship between assignor and assignee. At the cost ofrepetition, it was not even decided finally whether this was in fact going to be treated as a loan. Because in the same letter K.N.L. states that it may not even repay the loan at any time and if it does not or cannot repay K.F.S.L. would be merged in K.N.L. It is therefore a clever ploy designed by the parent company joining hands with the subsidiary and D.M.L. which owns 33% stake in the parent company to make out a case of equitable assignment somehow or other. In pursuance of this letter and arrangement the so called mandate is issued by K.F.S.L. to G.T.B. As against K.F.S.L., K.N.L. having no legally enforceable right, it could not mandate K.F.S.L. to give a mandate to G.T.B.

42. The assignment of actionable claim is governed by Chapter VIII of the Transfer of Property Act and Section 133 defines transfer of actionable claims which is legal assignment. The case made out here is of equitable assignment. It is therefore to be borne in mind at the outset that what is transferred should be an actionable claim. Mr. S.D. Parekh, learned senior Counsel for the applicants relied on the commentary on Section 133 in Mulla's Transfer of Property Act, 8th edition at page 1015, which explains equitable assignment as under :

An equitable assignment -

1. may be an assignment by way of charge.

2. need not be in writing.

3. takes effect as between the assignor and the assignee from the date of the assignment, notice being necessary only to bind the debtor.

4. must be made for value except where it is perfect and complete and operates as a gift (z), and the assignee cannot give a valid discharge unless expressly empowered by the assignment.

The learned Counsel tried to bring his case in Sub-clause (4) which shows that it must be made for value except where it is perfect and complete and operates as a gift. In the present case what is assigned by K.F.S.L. cannot be said to be for value because K.F.S.L. has no liability towards K.N.L. Exception is when it operates as a gift. In this case it is not claimed nor it otherwise operates as a gift. Reliance was placed by the learned Counsel on a judgment of the Supreme Court in Seth Loon Karar Sethiya v. Ivan E. Joh : [1969]1SCR122 . In this case the appellant was indebted to a Bank. He executed a Power of Attorney in favour of the Bank authorising the bank to execute the decree obtained by the debtor against third party and credit the money on realisation to the debtor's account. The bank levied execution of the decree, but the execution application was filed in the name of the appellant and was signed by the Manager of the Bank as holder of power of attorney to which the appellant objected. It was held that on the tenor of the document as well as from its terms, the power given by the bank was power coupled with interest and the same was irrevocable in view of Section 202 of the Contract Act. In para 5 it is observed :

5. There is hardly any doubt that the power given by the appellant in favour of the Bank is a power coupled with interest. That is clear both from the tenor of the document as well as from its terms. Section 202 of the Contract Act provides that where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice to such interest. It is settled law that where the agency is created for valuable consideration and authority is given to effectuate a security or to secure interest of the agent, the authority cannot be revoked. The document itself says that the power given to the Bank is irrevocable. It cannot be said in,fairness to Shri Chagle that he did not contest the finding of the High Court that the power in question was irrevocable.

It is further observed in para 7 as under :

7. This takes us to the question whether the power given to the Bank amounts in equity to an assignment of the decree or any portion thereof, to the Bank. From the power of attorney it is clear that the amount under the decree was specifically earmarked for discharge of the debts due to the Bank. It was constituted as a special fund for the said purpose. The power to realise that fund was made over to the Bank with the further authority to set off the amount realised towards the debts due to it. In other words, the power of attorney is an engagement to pay out of the particular fund the debt due to the Bank and hence the same constitutes an equitable assignment of the amount due under the decree or so much of that amount as is necessary for discharging the debts due to it. That rule is recognised in Watson v. Duke of Wellington (1830) 39 E.R. 231 There in the plaintiff, executors of Mr. Sims, had advanced a large sum of money to Marquis of Hastings on the joint bond of the Marquis and a surety. The sum due on the bond exceeded 9,000 pounds. Towards the end of 1825, the Marquis having returned from India to England, the plaintiffs made repeated applications to him for payment of the debt. The Marquis represented that he was about to receive a large share of the Deccan prize money; promised that their demand should be paid out of that funds; and begged that, in the meantime, no proceedings might be taken against him or the assets of his surety. On February 6. 1826, Mr. Allen, the solicitor of the plaintiff, again waited on the Marquis, who then stated that he had directed Col. Francis Doyle, whom he had empowered to receive his share of the prize-money, to pay the debt and costs dueto the executors of Mr. Sims; and at the same time the Marquis wrote and delivered to Mr. Allen a letter addressed to Col. Doyle directing him that the executors of Mr. Sims were claimants on that fund for a bond debt with interest. From these facts the Court of Chancery came to the conclusion that there was an equitable assignment in favour of the executors of Mr. Sims of a portion of the prize-money sufficient to meet the debts due to the estate of Mr. Sims by the Duke of Wellington. To the same effect is the decision in Burn v. Carvelho (1839) 41 E.R. 265 Therein the Court of Chancery held that in equity, an order given by a debtor to his creditor upon a third person having the assets of the debtor to pay the creditor out of such fund is a binding equitable assignment of so much of the fund.

The learned Counsel also relied on the case of Bharat Nidhi Ltd v. Takhatmal (Dead) through H.L.Rs. : [1969]1SCR595 . In this case before the Supreme Court a contractor to the military and other authorities entered into an arrangement with a bank whereby it agreed to finance the contracts and to advance monies to the contractor against his bills for supplies under the contracts. For the purpose of carrying out this arrangement the contractor executed an irrevocable power of attorney in favour of the Bank authorising it to receive payments of the bills from the authorities. The contractor made out a bill on the military authorities for a sum and handed over the same to the Bank for collection with an endorsement that it should be paid to the Bank. The Bank sent the bill for payment, but before it received the payment, the amount due under the bill was attached by a creditor of the contractor in execution of a money decree obtained by him against the contractor and it was held that the attachment under Section 60 of the C.P.C. was not valid and the power of attorney with the endorsement on the bill was a clear engagement by the contractor to pay the Bank out of the monies receivable by him under the bill and amounted to an equitable assignment of the funds by way of security. In this case a specific distinction was pointed out by the Supreme Court in a mere pay order and an assignment by stating that pay order is revocable mandate and it gives the payee no interest in the funds. An assignment creates an interest in the fund and is not revocable. If considered on the background of the facts there is no irrevocable mandate and no interest in the find is created in favour of the assignee K.N.L.

43. Subject of equitable assignment has been discussed at length In the judgment of House of Lords in William Brandt's Sons & Co. v. Dunlop Rubber Co. Ltd. (1905) Hou of Lor 454 In the case before the House of Lords, merchants agreed with a bank by whom they were financed that goods sold by the merchants should be paid for by a remittance direct from the purchasers to the Bank. Goods having been sold by the merchants, the bank forwarded to the purchasers notice in writing that the merchants had made over to the bank the right to receive the purchase-money and requested the purchasers to sign an undertaking to remit the purchase-money to the bank and it was held that there was evidence of an equitable assignment of the debt to the bank with notice to the purchasers, and that the bank could recover the debt from the purchasers. Reliance was also placed on a judgment of the Bombay High Court in Jagabhai Lalluhhai v. Rustomji Nasarwanji I.L.R. 9 Bom. 311 In that case before the Bombay High Court, a firm of Sower by & Co. took a contract from Government on 12.11.1877 to construct a barrel house at Kirkee and on 28.11.1877 the plaintiff agreed to advance monies upto Rs. 15,000/- for the purpose of enabling the firm to carry out the contract. Under the agreement the plaintiff was to receive all sums to become due from the Government on the contractors' bills and to pay the balance to the firm after repaying himself all advances with interest. On the same day the firm executed a power of attorney to the Plaintiff authorising him to receive from the Government Engineer all such sums to become due to the firm under the contract which power of attorney was deposited in the office of the Executive Engineer, Pune. Sometime in March/April, 1878 Sower by left for England upto which time Rs. 34,900/- had been advanced by the plaintiff and a balance of Rs. 14,942/- still remained due to him after giving credit for the sums received on the bills passed by the Executive Engineer. On 24.7.1878 plaintiff entered into a fresh agreement with Framji Edulji similar to the former one, to make further advances to the firm upto Rs. 16,000/- in addition to Rs. 15,000/- on the same terms as those mentioned in the previous agreement, and by means of these advances, the contract was completed at the end of 1879. In 1878 the defendant obtained a decree against Sower by and attached the right, title, and interest of Sower by in a sum of Rs. 5,034 in the hands of Executive Engineer which was then due to the firm on the contract. The plaintiff alleged that Rs. 13,700/- were due to him and applied to have attachment removed. The application was rejected on 30.9.1879 and the attached sum was paid to the defendants. The plaintiffs filed suit to recover Rs. 5,034/- from defendant. It was held that the first agreement of 28.11.1877 coupled with the execution of the power of attorney to him of the same date, amounted to an assignment to the plaintiff of the sums to become due to Sower by & Co. on the bills passed by the Executive Engineer.

44. Mr. Janak Dwarkadas referred to the judgment in the case of Kisen Gopal Bogree v. L.J. Bavin : AIR1926Cal447 wherein it is held :-

At Common Law a debt was looked upon as a strictly personal obligation and an assignment of it was regarded as a mere assignment of a right to bring an action at law against the debtor. Hence the assignment was looked upon as open to the objection of maintenance. After a time the Common Law Courts recognised the right of anyone who had a pecuniary interest in the debt to sue in the name of the creditor: (Row v. Dawson 1 Ves. 331). But Courts of equity admitted the title of an assignee of a debt regarding it as a piece of property, as asset capable of being dealt with like any other asset, and treating the necessity of an action at law to get it in as a mere incident. Every such assignment was considered in equity as in its nature amounting to a declaration of trust, and to an agreement to permit the assignee to make use of the name of the assignor in order to recover the debt or to reduce the property into possession. In order to constitute an assignment of a debt or other chose in action in equity no particular form is necessary. Prosser v. Exmonds 1 Y. and C. 481 applied.

In that case before the Calcutta High Court, one Eastern Machinery and Engineering Co. Ltd. sold a lathe to Diamond Drill Syndicate Ltd. through M/s. Kilburn & Co. at a price of Rs. 2,000/- and a sum of Rs. 200/- was to be deducted and Rs. 1,800/- were to be paid. This sum was claimed by the appellant. It was held that he had lent money to Eastern Machinery & Engineering Co. and that company had endorsed the bill in respect of the lathe and had handed over the bill to the appellant in order that he may collect money on account the debt due to him from Eastern Machinery & Engineering Co. The endorsement was in these words 'M/s. Kilburn & Co. kindly remit to Babu. Kisen Gopal Bogree who will collect on our behalf. (Underlining is mine). The learned Judge came to the conclusion that the endorsement was not an assignment of debt which was owed by M/s. Kilburn & Co. to M/s. Eastern Machinery and Engineering Co. Ltd. and that it was nothing more than an order to pay. Another judgment of the same High Court in the case of Prokash Chandra Kishenlal v. Kay Constructions Co. : AIR1962Cal654 wherein distinction is made between pay order and assignment, was also brought to my notice. Head note of the said decision is as under:

Transfer of Property Act (1882), Section 130 - Pay order and assignment -Distinction - Endorsement on bill that third person will realise debt - Instrument held as assignment and not pay order.

A pay order must be distinguished from an assignment. The former gives the payee no interest in the fund and the liability of the debtor is still to the creditor and not to the payee. But an instrument though in form a pay order may amount to an assignment and may pass the interest in the fund to the payee. Each instrument must be construed in the light of its own language and in the light of the attendant circumstances.

Where the endorsement on the bill contained a positive direction by the creditor to the debtor to pay the amount of the bill to A, the direction was expressed to be irrevocable and the debtor had accepted it unconditionally.

Held that the effect of the endorsement was that the title to the debt would pass to A and that only A was entitled to realise it. Though the instrument was in form a pay order the intention to assign the debt was plain on the face of it. It was therefore, an instrument of assignment of actionable claim in writing as required by Section 130.' Similar view is taken in Daga Films v. Lotus Productions and Anr. : AIR1988Cal280 .

45. All these authorities considered together bring out the legal position that there must be a debt. In the present case there is no debt. There was breach of contract or termination of contract and suit for damages or recovery of money could be filed. There was no liability as against K.F.S.L. and in favour of K.N.L. K.N.L. is only assured loan by K.F.S.L. There is nothing on record to show any irrevocable authority. K.F.S.L. could withdraw the mandate at any moment and if it did so, there was nothing on the basis of which K.N.L. could enforce any liability against K.F.S.L. and therefore at the most it can be said to be a pay order and no equitable assignment as is tried to be made out. Even the authorities relied upon by the learned Counsel for the applicants do not support the claim that it amounts to an equitable assignment. These aspects of the matter reinforces earlier observation that it is absolutely necessary to make out case of equitable assignment by pleading.

46. The so called mandate issued by K.F.S.L. to G.T.B. does not create any interest in favour of K.N.L. much less in favour of D.M.L. D.M.L. is only a beneficiary even according to the pleadings. It has no interest in the debt and so far as K.N.L. is concerned, there being no liability enforceable by K.N.L. against K.F.S.L, the direction or mandate would be only an order to pay to the party to whom K.F.S.L, wanted to advance loan and as such no case of equitable assignment whatsoever is made out.

47. Before I proceed to discuss other points, one more aspect of the same subject is required to be pointed out. The debt even according to K.F.S.L. was Rs. 74 crores out of which assignment in favour of K.N.L. is said to be for Rs. 49.37 crores. Thus there is a splitting up of the so-called debt and this further re-in forces the aspect referred to earlier that it is absolutely necessary to plead a case of equitable assignment. Even if there is an assignment of part of the debt, then it must be explained as to what is done regarding the remainder. At one stage learned Counsel for the applicants stated that he may even give up that claim. It does not appear that a party would give up claim for about Rs. 25 crores and the argument is without any substance. In any case no such case is pleaded.

48. In this connection learned Counsel for respondent No. 1, Shri Janak Dwarkadas, drew my attention to the commentary of Mulla on Transfer of Property Act, 8th edition, page 1016. While discussing the subject of assignment of debt, the learned author has stated as under :

Assignment of debts. - As an actionable claim includes future debts there can be a valid assignment of a future debt e.g. of salary to become due, or of future book debts, or of future rents. In England, the question has been raised whether an assignment of part of a debt is within the statute. Darling, J. in a case, which was reversed upon another ground, held that an ascertained part of an existing debt could be assigned. But Bray, J. in another case held that it could not, and in later case of In re : Steel Wing Co. Ltd. an assignment of part of a debt was held not to be within the statute so as to pass the legal right but that it constituted the assignee a creditor of the debtor in equity, and this view has been accepted without question recently. This has been followed in a Madras case, but in an earlier case the same Court held that a part of a debt could not be assigned, and now that the Legislature has abolished partial subrogation, this would seem to be correct. The Calcutta High Court followed the earlier Madras case that a part of a debt could not be assigned.

The question was considered by the Patna High Court. After a review of the English authorities it was said that though the point was not finally settled in England the weight of authority in that country was that assignment of a part of a debt did not pass the legal right to that portion of the debt under Section 25(6), of the Judicature Act but operated in equity to constitute the assignee a creditor of the debtor. In India the position was different. It followed from the definition of an actionable claim that a claim to a debt which could not be enforced by action, e. g. when it was barred by limitation was not property and the same limitation must apply to a part of a debt which could not be sued upon under Order 2, Rule 2 of the C.P.C. Therefore, although the Transfer of Property Act did not make any distinction between whole debt and part of a debt and both might be transferred by the transferee might find that what had been transferred to him was not an actionable claim. It may be noted that it was a case of a separate and distinct debt and the above observations of the learned Judges were in the nature of obiter dicta. The Lahore High Court has, however, dissented from the Patna case and held that a part assignment of a debt is valid in law and an action can be maintained thereon by the transferee provided he makes the transferor and any other transferee who may be concerned parties to the suit and that Order 2, Rule 2 of the C.P.C, has no bearing on the question. It may be mentioned that although a decree is not an actionable claim, it has been held that there cannot be transfer of part of a decree.

In the case of Durga Singh v. Kesho Lal AIR l940 Pat. 170 question of assignment of part of debt was considered. Reference was made to 2 K.B. 636 wherein Bray J. refused to follow an earlier decision, viz. :

But if an absolute assignment of part of a debt is valid under Section 25, Sub-section (6), the consequence is that the assignee is able to sue the debtor without joining the assignor or the assignee of the other part of the debt, if there have been two assignments; and it may happen that if the debt had been split up into two, three or four parts, there might be two, three or four actions with different results. All sorts of difficulties would arise, and a great burden, an unnecessarily great burden, would be placed upon the debtor....

In the case before the Patna High Court, a suit was brought by the respondent to recover certain sum of money from the appellant. Suit was decreed by the Trial Court, but was dismissed in appeal by lower Appellate Court. That decree was set aside in second appeal by Rowland, J, and the judgment of the Trial Court was restored and therefore, defendant preferred Letters Patent Appeal. The facts necessary to appreciate the controversy are that on 6.11.1923 defendant No. 11 executed a zarpeshgi lease in respect of seven pies share in Mauza Bahpuri Majurahi in favour of the appellants, defendant (first party). On 10.11.1928 he mortgaged the same property to defendant No. 12 for Rs. 1,000/-and on 13.10.1932 he borrowed a sum of Rs. 330/- from the latter by executing a hand-note. On 23.6.1933 he sold to the appellant property already mortgaged to them and defendant No. 12 for a sum of Rs. 5,000/-. It was recited in the sale deed that out of total sum of Rs. 5,000/-, Rs. 2,125/- had been set off against the mortgage deed due to the vendees on the basis of the mortgage dated 6.11.1923 and the sum of Rs. 2,227/- had been left in deposit with them for the purpose of paying of the mortgage dues of defendant No. 12, The balance consideration money of Rs. 648/- was paid in cash. As the debt due to defendant No. 12 from defendant No. 11 on the hand note was not paid by the appellants, defendant No. 1 had to borrow sum of Rs. 450/- from plaintiff for the purpose of paying debt and on 28.1.1935 in consideration of advance made by the plaintiff to him, he executed a registered deed by which he has assigned to him (the plaintiff) his right to realise a sum of Rs. 500/-. from the appellant. The suit was brought by the plaintiff for recovery of Rs. 500/- with interest. Suit was decreed but the judgment was reversed in appeal on the ground that in law part of debt could not be assigned. This view was not accepted in second appeal by Rawland, J. who set aside the judgment of the subordinate Judge and restored the decree. The Division Bench of Patna High Court found that the principal point that arises in appeal is whether assignment of part of debt is valid in India. The Division Bench found that the point was somewhat difficult one and does not appear to have been fully discussed in any of the Indian authorities cited. The Division Bench referred to 42 I.C. 684 and stated that it made an observation to the effect that omission of the word 'absolute' from Section 130 of the Transfer of Property Act, which deals with the assignment of actionable claim, was a deliberate departure from the rule of English law and indicated that an assignment of part of a chose in action can be given effect to under the Transfer of Property Act. Reference was made to 48 M.L.J. 432, judgment of Ramesam, J. who dissented from the above observation and after referring to certain English cases expressed view that assignment of part of the debt is not valid. (Underlining is mine) Thereafter in 52 Mad. 465, a Bench of two Judges of the same Court followed an earlier case of 1919 in preference to the decision of Ramesam, J. After referring to different authorities and a review of the entire case law, it is observed :

Thus, the conclusion which I have arrived at may be summed up in a few words. The Transfer of Property Act does not recognise any distinction between whole debt and part of a debt. Both may be transferred under that Act, if they come under the category of 'actionable claims' as an actionable claim is 'property'. The transferee of a part of a debt may, however, find that what is transferred to him is not an actionable claim as under Order 2, Rule 2, a single cause of action cannot be allowed to be split up into several causes of action. Order 2, Rule 2 being a rule of procedure, does not affect the right of transfer, that is to say, it cannot make what is transferable non-transferable. It does however, bar the right of suit in certain cases and it may prevent the transferee of a part of a debt from enforcing his claim and thereby make the transfer nugatory.

On facts it was found that debt which was assigned by defendant No. 11 to the plaintiff was distinct and separate debt and not merely a part of debt.

49. The learned Counsel also referred to Snell's Principles of Equity, 28th edition, page 78, in which it is observed :

(3) ASSIGNMENT.- Despite the lack of formal requirements there must be some transaction which sufficiently manifests an intention to assign, i.e. assure or transfer, a mere mandate or authority is not enough. Thus if A owes money to B, who gives C authority to receive it and pay it to D, there is no assignment even if C has promised D to pay the money to him. A cheque, too, 'is only a revocable mandate.

In the judgment referred to above it is pointed out that in case of assignment of part of debt the right to enforce debt would be split up and the debtor may have to face two different litigations. Under Order II, Rule 2 of the C.P.C. the entire claim in respect of a cause of action has to be made in suit and if not made either the right for the remaining part of the claim arising out of the cause of action has to be given up or leave of the Court is required in order to make that claim afterwards. All this leads to one definite conclusion that the case of assignment of part of debt must be specifically pleaded and the Court must be satisfied that either the plaintiff is giving up the claim for the remainder or has reserved it and if not pleaded then at the eleventh hour plaintiff cannot produce some document and take the other party by surprise. On this ground also the assignment is bad in law, even if it is found to be otherwise legal and valid. Even otherwise the case of assignment of part of debt is not made out. No statement is made in the application as required by Order 11, Rule 2 of the C.P.C.

50. This takes me to consider the most important part of the defence of respondent No. 1 that the agreement of sub-lease and the consequent sub-lease to be granted are void and non-est as it is in violation of the Court's order of injunction. In Execution Application No. 98 of 2001 in Misc. Petition No. 189 of 1995 this Court (Kapadia, J.) passed an order that pending hearing and final disposal of the petitions/misc, applications, K.N.L. is directed not to dispose of their assets (including shares) pending further orders, except in usual course of business. This order will apply also to other group companies who are respondents in the conjoint petitions, earlier discussion in respect of various transactions between V.B.L. and K.F.S.L. clearly show that lease was to be executed by V.B.L. in favour of K.N.L. and in fact K.N.L. which was in possession of the property and was to get it on lease for 99 years continued in possession after the sale of property in favour of V.B.L. and in the earlier discussion I have already referred to the affidavits filed on behalf of respondent No. 3 K.N.L which clearly shows that even K.N.L. was treating that they were lessee and were liable to pay rent and were in arrears of rent and the lease deed was to be executed either in favour of K.N.L. or its nominee, in fact K.N.L. would have got the lease of the entire plot which was subject matter of transaction of sale and in respect of which there was option to buy-back. That lease of the entire property was given up by obtaining a lease in favour of K.F.S.L. for lesser area. What is contended on behalf of the applicant and respondent No. 3 strenuously is that what is given up is only option to repurchase. An agreement of sale does not create any interest in the property. The only right it gives to the person proposing to purchase the property is to claim specific performance. Therefore, option to repurchase did not create any interest in the property. This need not be disputed. However, the matter does not end here. I may repeat here that as stated earlier, I am not entering into the aspect of nature of transaction between V.B.L. and K.N.L. and I am accepting for the purpose of this litigation that it was a sale with option to repurchase in favour of K.N.L. However, the above discussion indicates that it is not a case of merely giving up an option to repurchase, but it is in fact giving up a valuable right to hold the property on lease. The property was already in possession of the K.N.L. as lessee and what has remained was only to obtain lease deed which in fact was obtained for a lesser area in favour of its nominee K.F.S.L. This fact has not been made clear in the application. The applicants do not explain how K.N.L. goes out and K.F.S.L. comes in. When the earlier agreement was to grant lease to K.N.L. and there was no dealing between V.B.L. and K.F.S.L., lease was obtained in favour of K.F.S.L. When considered on the entire background, this was a clever devise to avoid, if possible, proceedings for contempt on the ground of violation of order dated 18.8.2001. It is clear that what is given up by K.N.L. is right to hold the entire property on lease and as such it amounts to giving up a valuable property right and is in violation of the Court's order. K.N.L. was prevented by the aforesaid order from transferring or disposing of any property. The order was binding on all the parties who are respondents in the conjoint petitions against whom there are execution applications in pursuance of the consent decree passed against them. K.F.S.L. is not a respondent and that is why very ingeniously the lease is obtained in the name K.F.S.L., apparently create a show that the property is transferred not by K.N.L. and K.F.S.L. not being a party respondent, there is no violation of the order. The aforesaid background would clearly show that the property was in fact transferred by K.N.L. by obtaining the lease in the name of K.F.S.L. and in the process the lease hold right over the entire area was lost and therefore, there was violation of the order of this Court. This is undoubtedly a clever devise to keep the property out of reach of the Custodian.

51. Another aspect of the matter is that K.F.S.L. is wholly owned subsidiary of K.N.L. and any property belonging to the K.F.S.L. can be attached in execution of a decree against K.N.L. Therefore, although K.F.S.L. is not respondent in co-joint applications it is still covered by the order of 18.8.2001.

52. The argument that giving up option to repurchase is an act done in usual course of business is to be mentioned only for being rejected outright. It is not possible to comprehend that the sale and purchase of immovable property can be said to an act done in usual course of business by a company like K.N.L. when admittedly it is not their regular business to sell and purchase immovable property. If it was a case only of giving up the option to repurchase then there was no question as that does not amount to transfer of property and does not create any interest in the property. In view of the aforesaid facts and circumstances, the transfer of property by grant of sub-lease by K.F.S.L. is itself in violation of the Court's order and any transfer in violation of the Court's order is void and not merely voidable. Therefore, G.T.B. is fully justified in repudiating the contract after it came to know all the facts and it has in my view rightly terminated the contract.

53. Even otherwise all the above facts and circumstances clearly show that a cloud was raised on the title of the K.F.S.L. and what G.T.B. expected from K.F.S.L. was to seek clarification from the Court in view of the fact that it had received a notice from the Custodian. No such clarification has been sought so far. It is true that during the course of arguments, when this point was raised, the learned Counsel for the applicants stated that the Court may give clarification. I do not think that this argument can serve any purpose because in these proceedings there is no question of giving any clarification. Any such order is beyond the scope of the proceedings. A party purchasing immoveable property is entitled to ask the transferor to clear any cloud on the transferor's title if the circumstances lead him to an inference that the title is clouded and it is risky to enter into any transaction with the transferor in respect of the property unless the inference is fanciful and totally unfounded. In my view the aforesaid facts and circumstances were sufficient to justify such an apprehension on the part of the G.T.B.

54. In this connection another argument advanced on behalf of the applicants by the learned Counsel was regarding suppression of document by respondent No. 1. It was pertaining to letter dated 11.1.2002 sent to the Custodian by G.T.B. in response to a notice received from the Custodian dated 28.11.2001. It is true that in this reply G.T.B. has stated that they were intending to acquire property from K.F.S.L. and not from K.N.L. It is also stated in the letter that the entire deposit of Rs. 74 crores was to be adjusted and appropriated towards long outstanding dues of various group companies and sub-lease was to be acquired after receipt of N.O.C. from the Appropriate Authority. The sole objective of the proposed sub-lease from K.F.S.L. was to adjust and appropriate the deposit towards long outstanding dues in the said group account and no outflow of cash was involved. It is further stated that on making enquiries G.T.B. came to know that K.F.S.L. is not a company which is respondent in the proceedings before the Special Court as it does not appear in the list annexed to the order of 18.8.2001. It is difficult to understand as to how G.T.B. could be said to be interested in suppressing this document. The fact that this document was not filed along with reply does not lead to any inference of suppression of a material document. Suppression of a document or suppression of material fact from the Court is no doubt serious, but it is not the law that if particular document is not filed. Court should immediately draw an inference that there is intention to suppress. This document is before the Court. No order interim or otherwise was even sought nor obtained by respondent No. 1 G.T.B. by suppression of this document. In this connection, Mr. Janak Dwarkadas, learned Counsel for the respondent No. 1 drew my attention to a judgment of the Division Bench of this Court in M/s. Gujarat Bottling Co. Ltd. v. The Coca Cola Company Appeal No. 183 of 1995 in Notice of Motion No. 316 of 1995 in Suit No. 400 of 1995. In para 10 of the judgment referring to the argument of the learned Counsel that equitable relief sought by the plaintiffs during the pendency of the suit should be denied because the plaintiffs are guilty of suppression of 1994 agreement at the time of institution of the suit was considered and reference was made to the judgment of the Supreme Court in S.P. Chengalvaraya Naidu v. Jagannath and Ors. : AIR1994SC853 the Division Bench pointed out that the Supreme Court has held that a party guilty of suppressing material information should be denied equitable relief, and further pointed out that it is difficult to appreciate how the 1994 agreement was relevant to be disclosed when the plaintiffs have come to the Court for enforcing a negative covenant under 1993 agreement. Secondly it was pointed out that 1993 agreement came to the notice of the learned Trial Judge at the time of consideration of ad-interim relief and certainly was highlighted at the time of hearing of the application for interim relief and therefore, it was held that it was not possible to deny relief when the facts have come to the knowledge of the Court before consideration of the question of grant of relief. (Underlining is mine) Mr. Parekh learned Counsel for the applicant relied on a judgment of the Supreme Court in Dhananjay Sharma v. State of Haryana : [1995]3SCR964 . This was a case entirely different on facts in which filing of a false affidavit had resulted in illegal detention. Similarly the case reported in : AIR1994SC853 (supra) is also not applicable to the facts of the present case. A reference to that judgment clearly shows that in case before the Supreme Court, the facts clearly revealed that the decree was obtained for partition of the property without mentioning at the trial the plaintiffs having executed a release deed before filing the suit. What is material is that suppression of the fact of executing release deed had resulted in passing of the decree and the decree was secured by such misstatement and suppression of facts. I therefore find that there is no substance in the argument of the learned Counsel for applicants that G.T.B. is guilty of suppression of material document and is in contempt.

55. On the contrary there is material on record to show that the applicants are guilty of suppression. I have already pointed out that in the application conveniently no reference is made as to how K.N.L. goes out and K.F.S.L. comes in and I have found that this is a very material aspect, because that leads to violation of the order and the applicants were interested in suppression this fact and therefore, if at all there is suppression it is suppression of material facts by the applicants and probably to cover up their own suppression, the applicants, have raised a hue and cry of suppression of letter dated 11.1.2002 by G.T.B. There is nothing in the letter which was required to be suppressed. It is rightly pointed out by the learned Counsel for respondent No. 1 that the letter was in response to the query of the Custodian and at that time on the basis of information received, respondent No. 1 G.T.B. felt that K.F.S.L. was not bound by the order. Can it be denied right to raise that contention at a later stage. The earlier discussion shows that K.F.S.L. was brought into the picture only to avoid challenge to the transfer on the ground of violation of Court's order.

56. This takes me to consider bona fides of the applicants and the question as to whether the application is premature. The Custodian has filed a chronological chart of the events along with affidavit of the O.S.D. Even in the present proceedings there was attempt to settle the matter and a conditional order was passed granting time for payment of 1/3rd amount but the application stood dismissed as the amount agreed to be paid by the particular date mentioned in the conditional order was not paid. In the affidavit of O.S.D. filed by the Custodian certain material aspects highlighting about the conduct of the applicant No. 1 D.M.L. are stated in the chart below :

-------------------------------------------------------------------

Sr. Date MA/MP/EA Particulars

No

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1. July 1995 Custodian's application for recovery of

money against respondent No. 3.

2. 10.11.1995 EA. 98/2001 Consent order in 248 of 1995.

3. Aug. 1996 MA. 206/96 Default application.

4. 6.11.1996 EA. 98/2001 Extension of time granted.Interest at

18% p.a. on defaulted sum.

5. 18.9.1997 EA. 98/2001 Consent order. Principal amount Rs.

1,13,25,043/-Quarterly installments

10.5 lacs/quarter. Liberal

instalments extending to 7 years.

Default provisions.

6. 10.3.1999 MA. 157/1999 Application by respondent No. 13 for ex-

tension of time. Similar applications

by other respondent Nos. 3 to 15.

7. 6.4.1999 EA. 98/2001 Order (a) Holding that respondent No.

13's contentions incorrect,

(b) Decree executable but directing not

to execute provided certain payments

made within the time prescribed.

8. 26.5.1999 MP. 44/1999 Petition by Dhanraj Mills Ltd.(Notified

party).

9. 29.9.1999 Agreement between Killick Nixon and

Vysya Bank.

10. 14.10.1999 MR 44/1999 Order.

Petition dismissed by Rane,

J.R. 3 to 15 injuncted from

dealing with their properties except

current assets in the usual course

of business. Appeal preferred to the

Supreme Court.

11. 18.11.1999 Supplementary agreement between Killick

Nixon and Vysya Bank during pendency

of the order of Justice Rane,

12. 6.1.2000 MP. 44/1999 Appeal against order in 44/99 withdrawn

unconditionally.

13. 3/2000 MP. 176/2000 Filed by respondent No. 13 for

modification of decrees

dated 10.11.95 and 18.9.97

by reduction of rate of

interest and appropriation

of amounts paid

towards principal

dues. Similar applications by

respondent Nos. 5 to 15.

14. 1/2001 EA. 98/2001 Filed by Custodian.

15.8/2001 Affidavit filed by Killick Nixon

in execution application that

execution proceedings

will lead to its liquidation.

16. 18.8.2001 Order of injunction of Justice

Kapadia.

57. On this background one has to consider whether the present application is bonafide. It is clear from the very recitals in the application and from the documents relied upon that on the date of this application i.e. 11.1.2002 the applicants had no right to make any claim. It is already pointed out above that it is to be treated as suit for specific performance and it is filed before date on which the K.F.S.L. was in a position to grant lease as per the agreement, N.O.C. or the order from the Competent Authority, whatever we may call it, was not received. Therefore, K.F.S.L. cannot claim that it was in a position to grant sub-lease on the date of application. Therefore an ingenious strategy was devised of making only a money claim on allegations that the amount was immediately due on execution of the sub-lease agreement. A receipt was also passed for the said payment by G.T.B. to K.F.S.L., but in fact the amount was not paid. The entire attempt is obviously Intended to see that the execution proceedings are frustrated. Attempts are made to see that the Court does not attach entire property of K.N.L. and attempt in that direction becomes more obvious from the conduct of introducing an altogether new amendment at the fag end of the arguments. Apart from claiming amendment to join V.B.L. as party respondent, even though that amendment was earlier rejected by a speaking order, the applicants moved applications for the same and also for a further amendment to the effect that in case the Court comes to the conclusion then lease hold rights and interest of K.F.S.L. (applicant No. 2) in the said property under indenture of lease dated 28.9.2001 be attached and sold and the sale proceeds be appropriated towards satisfaction of decretal dues. It is a very novel mode by which the applicants are seeking in the alternative to a money decree, an order of attachment of property belonging to one of them. I have not noticed any proceedings in which an applicant comes to the Court with a request to issue order of attachment of his own property and clearly the attempt is to see that the property of K.N.L. is not attached and the Custodian should be left with no other choice. It must be pointed out that it is the prerogative of the judgment creditors to claim which of property of the judgment debtor should be attached in execution of the decree and the Court will attach the property pointed out by the judgment creditor. Another attempt of the present applicants is that in the execution as far as possible prevent the property of K.N.L. being attached and to stall the execution at any rate, and the amendment sought at the fag end of argument is with that objective. It is hereby rejected (No separate order is passed). The introduction of such an amendment at the fag end makes obvious the intention of the applicants. Inter-connection between the applicants and respondent No. 3 is already indicated and there is no dispute about it. The entire conduct of the applicants shows that the application has been filed as a result of a well designed plan. It is obvious from the conduct of applicant No. 1 D.M.L. that probably not satisfied with the siphoning of funds from the banks and financial institutions, for which it is notified by the Custodian, it has designed this strategy to dupe one more bank (G.T.B.). It was a well-knit net to catch the fish (G.T.B.). Attempt was obviously to cough up Rs. 74 crores from G.T.B. and satisfy the decrees and then leave the G.T.B. to its remedy for recovery of debts from the various group companies. On behalf of respondent No. 3 criticism was levelled against Custodian and serious attack was made on the role of the Custodian. It was contended by respondent No. 3 and supported by the applicants that the Custodian should be anxious to see that decrees are executed. Application was filed for recovery of decretal dues and the Custodian should have supported the applicants. In my view the Custodian has taken the right stand and has not fallen prey to the evil design of the applicants and K.N.L. It is not the duty of the Custodian to see that somehow or the other money comes irrespective of the fact that in the process somebody is cheated. The entire claim even on facts is found to be not only untenable but false to the knowledge of applicants. It is vexatious and frivolous. It is a well designed plan to pick the pocket of G.T.B. with the help of a Court order by creating a show of honesty and anxiety on the part of D.M.L., K.N.L. and K.F.S.L. who are birds of the same feather to satisfy the decrees. All of them would be happy if the Court falls prey to their evil design. It is therefore natural that the conduct of the Custodian is made subject of serious comments and attempt is made even to doubt his integrity. Fortunately the Custodian could see the things and did not exhibit shortsightedness.

58. This type of conduct of the applicants and respondent No. 3, specially of the notified party joining hands with applicant No. 1 and respondent No. 3 must be deprecated and nipped in the bud lest the other notified parties or judgment debtors indulge in similar tactics to victimise creditor banks, the Custodian and for that purpose use Court proceedings i.e. process of law in such mischievous manner. I am therefore inclined to saddle heavy costs, which would include exemplary (special) costs. Taking into consideration that the final hearing went on for 9 days, I am inclined to saddle costs of Rs. 3 lakhs on the applicants. Out of the costs recovered, 2/3rd shall be paid to respondent-No. 1 G.T.B. and 1/3rd shall be paid to respondent No. 2 custodian. Applicants and rest of the respondents shall bear their costs. Applicants are given one month's time to pay the costs. The draft amendments dated 26.4.2002 claimed by the applicants are rejected.

59. Application is dismissed with the aforesaid order as to costs.