REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5918 OF 2012
(Arising out of SLP (C) No. 11501 of 2009)
Vidur Impex and Traders Pvt. Ltd. and others … Appellants
versus
Tosh Apartments Pvt. Ltd. and others … Respondents
With
CIVIL APPEAL NO.5917 OF 2012
(Arising out of SLP (C) No. 17156 of 2009)
Bhagwati Developers Pvt. Ltd. … Appellant
versus
Tosh Apartments Pvt. Ltd. and others … Respondents
J U D G M E N T
G. S. Singhvi, J.
1. Leave granted.
2. Whether M/s. Vidur Impex and Traders Pvt. Ltd., and five other
companies (hereinafter described as the appellants), who are said to have
purchased the suit property, i.e. 21, Aurangzeb Road, New Delhi in
violation of the order of injunction passed by the learned Single Judge of
the Delhi High Court are entitled to be impleaded as parties to Suit
No.425/1993 filed by respondent No.1 – M/s. Tosh Apartments Pvt. Ltd. is
one of the two questions which arises for consideration in these appeals
filed against judgment dated 20.2.2009 of the Division Bench of the Delhi
High Court. The other question which needs consideration is whether the
Delhi High Court was justified in appointing a receiver with a direction to
take possession of the suit property despite the fact that the Calcutta
High Court had already appointed a receiver at the instance of M/s.
Bhagwati Developers Pvt. Ltd. (for short, ‘Bhagwati Developers’).
3. The suit property was leased by the Secretary of State for India to
Sidh Nath Khanna and Sukh Nath Khanna sometime in 1930. After 12 years, the
Governor General in Council sanctioned the grant of perpetual lease in
favour of one of them, namely, Sidh Nath Khanna. In the family partition
which took place in December 1955, the suit property fell to the share of
Shri Devi Prasad Khanna, who was one of the heirs of Sidh Nath Khanna. He
rented out the same to the Sudan Embassy on 12.9.1962. In October 1977, the
name of respondent No.2-Pradeep Kumar Khanna (son of Devi Prasad Khanna),
who died during the pendency of the litigation before the High Court and is
represented by his legal representatives, was entered in the records of the
Ministry of Works and Housing, Land and Development Office and the lease
was transferred in his name.
4. In March 1980, respondent No.2 mortgaged the suit property to
Shri S.N. Tondon. After 5 years, he entered into a collaboration
agreement with Shri Arun Kumar Bhatia (respondent No.3) for construction of
a multi-storied building. He also executed an agreement for sale in favour
of respondent No.3. In November 1987, respondent No.2 took loan from Shri
Avtar Singh and created an equitable mortgage in his favour. On 13.9.1988,
respondent No.2 executed an agreement for sale in favour of respondent No.1
for a consideration of Rs.2.5 crores. After some time, respondent No.3
executed assignment deed dated 13.12.1988 in favour of respondent No.2.
Simultaneously, the parties cancelled the collaboration agreement. After 3
months, respondent No.2 mortgaged the suit property in favour of respondent
No.4. In 1992, respondent Nos. 2 and 4 entered into an agreement whereby
the latter agreed to provide various services including the one that he
will get the suit property vacated from the Sudan Embassy and for that he
will charge Rs.4 crores.
5. The Sudan Embassy vacated the suit property on 12.5.1992 and handed
over possession to respondent No.2, who is said to have handed over the
same to respondent No.4. On coming to know about the proposed alienation of
property by respondent No.2, respondent No.1 filed Suit No.425/1993 in the
Delhi High Court for specific performance of agreement for sale dated
13.9.1988, award of damages and injunction. It also filed IA No.1947/1993
under Order 39 Rules 1 and 2 CPC. The learned Single Judge passed order
dated 18.2.1993 and directed that defendant Nos. 1 and 3 (respondent Nos. 2
and 4 herein) shall not transfer, alienate or part with possession in any
manner or create third party rights in respect of the suit property. After
receiving summons, respondent Nos.2 and 4 filed IA No. 10730/1993 under
Order 7 Rule 11 for rejection of the plaint on the ground that the same was
barred by time. The learned Single Judge dismissed the application vide
order dated 5.4.1994 and directed that interim order dated 18.2.1993 shall
continue.
6. On 19.2.1997, respondent No.2 executed 6 agreements for sale in
favour of the appellants for a total consideration of Rs.2.88 crores. In
furtherance of those agreements, six sale deeds were executed and
registered on 30.5.1997. In the meanwhile, the appellants executed
agreement for sale dated 18.3.1997 in favour of Bhagwati Developers for a
consideration of Rs.4.26 crores and received Rs.3.05 crores.
7. At that stage, respondent No.1 filed IA No. 8145/1998 for restraining
respondent Nos.2 and 4 from handing over possession of the suit property to
any other person. Respondent No.2 contested the application by asserting
that he had not executed any sale deed in favour of the appellants and that
possession of the suit property had already been handed over to respondent
No.4. Thereupon, respondent No.1 filed CCP No. 118/1998 under Order 39
Rule 2A CPC with the allegation that the non-applicants including the
appellants herein had entered into a conspiracy for the purpose of grabbing
the property in violation of the order of injunction passed by the High
Court. The learned Single Judge entertained the contempt petition against
respondent Nos. 2 and 4 but declined to do so qua the appellants by
observing that no prima facie case had been made out against those who were
not parties to the suit. Respondent No.1 also filed IA No.8146/1998 under
Order 26 Rule 9 read with Order 39 Rule 7 and Section 151 CPC for
appointment of Local Commissioner and IA No.8147/1998 under Order 40 Rule 1
read with Section 151 CPC for appointment of a receiver. The Court
Commissioner appointed by the High Court to ascertain whether respondent
Nos. 2 and 4 were in possession of the suit property, submitted report
dated 10.2.2000 with the finding that respondent No.4 was in actual
possession.
8. Respondent No.2 filed application dated 16.12.1998 for vacating
interim order dated 18.2.1993. He pleaded that the agreement for sale
executed in favour of respondent No.1 was, in fact, a loan agreement and
the same was violative of Section 24 read with Section 23 of the Indian
Contract Act, 1872. He further pleaded that the agreement was void and
unenforceable because the requisite permission had not been obtained under
Section 269 UC of the Income-Tax Act. Respondent No.2 also filed Suit No.
161/1999 for grant of a declaration that sale deeds executed in favour of
the appellants were fictitious and were not binding on him. After about 2
years, Shri Bhupinder Singh, Advocate filed IA No. 255/2001 for withdrawal
of the suit on the ground that the parties have amicably settled their
dispute. Soon thereafter, the advocate who had instituted the suit, filed
IA No.1537/2001 for restoration of the suit by asserting that IA
No.255/2001 had been filed by an advocate who was not authorised to do so.
The learned Single Judge directed that the application be listed only after
filing of an affidavit by respondent No.2 that he had not authorised Shri
Bhupinder Singh, Advocate to file I.A. No.255/2001. Respondent No.2 did
not file the required affidavit till his death and as a result, I.A.
No.1537/2001 is said to be still pending.
9. Another front of litigation was opened by Bhagwati Developers with
the allegation that the appellants have failed to execute the sale deed in
terms of agreement dated 18.3.1997. The dispute between Bhagwati
Developers and the appellants was referred to the sole arbitration of Dr.
Debasis Kundu, an Advocate of the Calcutta High Court. The Arbitrator
passed award dated 7.1.1999 and directed the appellants to hand over vacant
possession of the suit property along with the building to Bhagwati
Developers on or before 31.1.1999 and also execute the sale deed after
securing requisite permission and no objection certificate from the
competent authorities. Simultaneously, Bhagwati Developers was directed to
pay the balance amount of Rs.1,20,90,000/-.
10. As the appellants failed to act in consonance with the arbitral
award, Bhagwati Developers filed an application under Section 36 of the
Arbitration and Conciliation Act, 1996 in the Calcutta High Court, which
was allowed by the learned Single Judge of that High Court vide order dated
17.8.2000 and a direction was issued to the appellants to comply with the
arbitral award. The learned Single Judge also appointed Shri Nar Narayan
Ganguli, Advocate as receiver and directed him to take possession of the
suit property. When the receiver came to Delhi for execution of the award,
respondent No.4 refused to hand over possession. Thereupon, the Calcutta
High Court directed the police authorities at Delhi to assist the receiver
for ensuring compliance of order dated 17.8.2000. Armed with that
direction, the receiver visited Delhi on 19.1.2001 and 5.2.2001 and took
symbolic possession of the suit property by putting locks and seals on all
the inner and outer gates.
11. When the representative of respondent No.1 learnt about the award of
the arbitrator and the order passed by the Calcutta High Court, he filed IA
No.625/2001 in the Delhi High Court under Order 39 Rules 1 and 2 read with
Section 151 CPC impleading respondent Nos. 2 and 4, the appellants and
Bhagwati Developers as parties and prayed that respondent Nos. 2 and 4 be
restrained from handing over possession of the suit property and that the
appellants be restrained from taking forcible possession in the garb of
some order passed by the Calcutta High Court. The learned Single Judge of
the Delhi High Court passed an ex-parte interim order dated 22.1.2001 and
restrained respondent Nos. 2 and 4 from delivering possession of the suit
property to the appellants and also restrained the latter from taking
possession. Bhagwati Developers challenged that order in FAO (OS)
No.90/2001, which was dismissed by the Division Bench of the High Court on
2.3.2001 with liberty to approach the learned Single Judge for appropriate
order.
12. Respondent No.4 also filed IA No. 1211/2001 in the Delhi High Court
for grant of injunction by alleging that an attempt is being made to
dispossess him in the garb of an order passed by the Calcutta High Court.
The learned Single Judge passed ex-parte interim order dated 8.2.2001 and
restrained the appellants, Bhagwati Developers, the receiver appointed by
the Calcutta High Court and Delhi Police from interfering with the
possession of respondent No.4. Some of the observations made in that order,
which have bearing on the disposal of these appeals, are extracted below:
“Quite clearly Respondents No.4 to 9 in this application were
aware of the fact that Defendant No.1 had filed Suit No.161/99.
A mention was made in the plaint in Suit No. 161/99 that the
present suit, that is, Suit No.425/93 was pending in this Court.
So, Respondents No.4 to in this application were also aware of
the pendency of this suit. It appears that Respondents No.4 to 9
in this application did not bother to find out the correct
factual position with regard to the possession of the suit
property or with regard to the interim orders passed by this
Court.
Well before all this, and apparently expecting Defendant No.1 to
perform the Agreement to sell, these 6 persons who are
Respondents No.4 to 9 in this application entered into an
agreement to sell the suit property to Respondent No.10 in this
application.
There appear to have been some disputes between Respondents No.4
to 9 in this application and Respondent No.10 in the application
in respect of the suit property. Since there was an arbitration
clause in the agreement between them, they referred the matter
to arbitration. The learned Arbitrator gave an Award dated 7th
January, 1999 wherein he directed Respondents No. 4 to 9 in this
application to hand over peaceful vacant possession of the suit
property to Respondent No.10 in this application. No objections
appear to have been filed to this Award with the result that
Respondent No.10 in this application filed proceedings in the
Calcutta High Court praying for a direction for the appointment
of a Receiver to take physical possession of the suit property.
The Calcutta High Court passed an order apparently directing the
Receiver to take possession of the suit property. On 13th
December, 2000 the Calcutta High Court directed the police
authorities to render all assistance to the Receiver to take
steps in accordance with the earlier order passed by the
Calcutta High Court.
When the Receiver and the police authorities came to take
possession of the suit property, L.K. Kaul became aware of the
proceedings in the Calcutta High Court.
It is submitted that there has been gross concealment and
misrepresentation of facts by Defendant No.1 in the suit to
Respondents No.4 to 9 in this application. There has also been
gross misrepresentation and concealment of fact by Respondents
No.4 to 9 in this application to Respondent No.10 in this
application. It is also submitted that there is also a gross
concealment and, therefore, a misrepresentation of facts by
Respondents No.4 to 10 in this application insofar as the
learned Arbitrator is concerned. Consequently, there has also
been a gross concealment and, therefore, a misrepresentation of
the facts so far as Calcutta High Court is concerned. It is
submitted that had all these facts been brought to the notice of
the concerned parties as well as to the learned Arbitrator and
the Calcutta High Court, there would have been no question of
any appointment of a Receiver in violation of the orders passed
by this Court on 18th February, 1993 read with order dated 31st
January, 2000.
I am prima facie satisfied that Defendant No.1 and Respondents
No.4 to 10 in this application are playing a cat and mouse game
with this Court. There has been a serious concealment and
misrepresentation of facts by Defendant No.1 in this suit. There
has also been a serious concealment and misrepresentation of
facts by Respondents No.4 to 9 in this application insofar as
Respondent No.10 in this application is concerned. Respondents
No.4 to 10 are at fault in not finding out what the correct
facts are and making necessary enquiries in this regard. They
appear to have deliberately misled the learned Arbitrator and
the Calcutta High Court.”
(emphasis supplied)
13. Respondent No.4 filed another application (IA No. 9576/2001) for
restraining the appellants from executing the sale deed in favour of
Bhagwati Developers. The learned Single Judge entertained the application
and passed interim order in terms of the prayer made. The same respondent
filed an application in EC No.10/2000 pending before the Calcutta High
Court and brought to the notice of that High Court, order dated 8.2.2001
passed by the Delhi High Court in Suit No. 425/1993. After taking
cognizance of the rival submissions, the learned Judge of the Calcutta High
Court passed order dated 15.2.2001 and made it clear that the order passed
by that Court will be subject to the order which may be passed by the Delhi
High Court. The relevant portions of that order are reproduced below:
“The facts remain that these facts were neither disclosed to the
decree-holder nor to the Arbitrator and this question was not
necessary to be gone into while executing the decree and, as
such, it was also not placed before this Court and this Court
having not been apprised of such facts had passed an order for
taking over possession of the property. In the order dated
8.2.2001 the Delhi High Court had taken a note of this position.
Be that as it may, it is not necessary to make any observation
with regard to the findings made therein, nor this Court can
comment on the order passed by another Court on the basis of the
materials placed before it. But it appears that there is every
possibility of conflicting orders being passed in respect of the
self-same properties between the parties or those claiming
through one or the other of them by two High Courts. Judicial
propriety demands that the court should maintain its decorum and
dignity and should not pass any order which will lie in conflict
with each other. It is the parties who may fight each other but
not the Courts. If some order is passed, it is expected that
another Court should pay proper regards and respect to such
order. Since it is pointed out that these facts were not
disclosed before this Court, therefore what would have been the
effect if these facts would have been disclosed before this
Court is a question which cannot now be presumed, but in all
probabilities it sees that if these facts were disclosed before
this Court, this Court might have been slow in passing the order
that had been passed earlier. Therefore, the order passed by
this Court, if it is in conflict with the order passed by the
Delhi High Court, the same shall always be subject to the order
that might be passed by the Delhi High Court.
Since Delhi High Court has also passed an order by which certain
direction was given to the Receiver appointed by this Court,
therefore, it is no more necessary to pass any further order. In
my view, the decree-holder in this proceedings who is added as
Defendant No.10 in the Delhi High Court suit should approach the
Delhi High Court for obtaining the appropriate orders if he is
so advised. If there is a conflict of decree which might affect
a proceeding in another High Court, in that event the same has
to be thrashed out in an appropriate proceeding. It is very
difficult to enter into such question in an execution proceeding
unless such question be raised in a proceeding under Order XXI
Rule 97 C.P.C. From the records of this Court, it does not
appear that any such application under Order XXI Rule 97 has
ever been made in order to enable the parties to resisting
possession in execution of the decree, so that they would have
an opportunity to place their cases about the executability of
the decree against them.”
(emphasis supplied)
14. Thereafter, Bhagwati Developers filed IA No. 2268/2003 in Suit
No.425/1993 pending before the Delhi High Court with the prayer that the
receiver appointed by the Calcutta High Court be continued. Respondent
No.1, who had already filed IA No.8147/1998 for appointment of receiver,
contested the application of Bhagwati Developers by asserting that it had
no locus standi in the matter because the agreement by which it purchased
the property from the appellants was fraudulent in nature. Respondent No.1
also reiterated its prayer for appointment of a receiver by the Delhi High
Court by contending that respondent No.4 was a ranked trespasser and there
was every possibility of his entering into clandestine deals and alienating
the property. On his part, respondent No.4 pleaded that his possession was
lawful because respondent No.2 had put him in possession in furtherance of
the agreement executed in 1992.
15. At this stage, we may mention that respondent No.4 also filed
IA No.7373/2006 in Suit No.425/1993 for grant of leave to amend the written
statement by incorporating the fact that respondent No.2 had agreed to pay
Rs.4 crores as service charges for getting the property vacated from the
Sudan Embassy with a stipulation that in the event of non-payment of the
amount, vacant and peaceful possession of the suit property will be handed
over to him; that even though he got the property vacated from the Sudan
Embassy, respondent No.2 did not pay the amount and handed over possession
of the property as security for the same. Respondent No.4 claimed that
these facts could not be incorporated in the original written statement
because his earlier lawyer thought that the same were not necessary for
deciding the suit filed by respondent No.1 for specific performance and
permanent injunction. Respondent No.4 also sought incorporation of the fact
that the property had been mortgaged to him and he was in possession as a
mortgagee. Respondent No.1 opposed the prayer for amendment by asserting
that respondent No.4 was seeking to make out a new case which was contrary
to the defence set up in the original written statement.
16. By an order dated 3.9.2007, the learned Single Judge of the
Delhi High Court dismissed IA No. 2268/2003 and IA No. 7373/2006 and
allowed IA No.8147/1998. He first considered the applications filed by
respondent No.1 and Bhagwati Developers in the matter of appointment of
receiver and held:
“26. Undoubtedly the initial agreement to sell is between the
plaintiff and defendant No.l (since deceased) now being represented by
his legal heirs. However, yet another agreement to sell come into
existence on 18th March, 1977 between Bhagwati Developers Private
Limited and respondents 4 to 9 by which 6 companies agreed to sell the
said property in favour of Bhagwati Developers with arbitration clause
contained in the agreement and that dispute shall be subject to the
jurisdiction of Calcutta High Court. The Court fails to understand as
to how the dispute relating to immovable property which is situated in
Delhi could be taken to Calcutta for adjudication by completing bye
passing the provisions of Section 16 of the Code of Civil Procedure.
It is also evident on record that defendant No. 3 who is currently in
possession does not enjoy the status either of licensee or of lessee
nor he is there any other capacity with the consent of either of the
parties. He is simply holding over the possession once open a time he
was given the task of getting of Sudan Embassy vacated. This Court
really wonder about the sanctity of such kind of agreements as
executed between the plaintiff and defendant No.3 and between
defendant No.l and defendant No. 3 for the purpose of getting the
Sudan Embassy vacated. Rent Control laws seem to have been thrown to
the winds. Task is taken by individual to get the premises vacated
from Sudan Embassy and that too for consideration. I am afraid if such
an agreement has a legal sanctity. That being so the possession of
defendant No.3 cannot be termed as legal in the suit property. If at
all his services charges were not paid he has the legal remedy either
with the plaintiff or defendant No.l. Under no law he can be permitted
to retain the possession of the property. Therefore in any case he has
to go out of the property he being stranger to the suit property
having no title or interest of any nature. Learned counsel for the
plaintiff has also been able to establish by way of various
authorities referred to above that it is a fit case where Receiver
should be appointed for the management of the property who can manage
the affairs of the suit property under the supervision of the Court as
there is every likelihood that in the eventuality of not appointing
the Receiver there is strong likelihood of the property being usurped
in a clandestine manner so as to frustrate the claims of the rightful
claimant. Even otherwise not appointing the Receiver at this juncture
might lead to multifarious litigation.
27. Therefore in order to prevent all these wrongs and further
damage and waste to the property, appointment of Receiver
has become essential so as to preserve the property.
Therefore, Sh. Rajesh Gupta, Advocate is hereby appointed as
Receiver. His fee is fixed at Rs.50,000/- initially subject to
revision, depending on the quantum of work he might have to
undertake while acting as Receiver to be paid by the plaintiff.
He will manage the affairs of the suit property by removing
defendant No.3 from the suit property. If need arise, he may
take the assistance of the police to thwart any resistance and
also may break open the locks of the property and make an
inventory of the goods lying therein. If he required to do any
work in respect of the property like maintenance, he shall seek
prior permission from the Court. This application is accordingly
allowed.
28. This order shall also take care of the application of
Bhagwati Developers Pvt. Ltd. proposed defendant No. 10
wherein while treating the possession of defendant No.3 as
unlawful possession in the suit property has sought directions
from this court that the Receiver appointed by the High Court
of Calcutta be continued and the possession of the property be
handed over to him who should retain the property in his
possession as in the capacity of Receiver. I may state that
when the matter was taken to Calcutta High Court between six
alleged transferees and Bhagwati Developers Pvt. Ltd., the
Calcutta High Court in its order dated 13th February, 2001 clearly
indicated that the decree passed by the Calcutta High Court if comes
in conflict with the order passed by Delhi High Court, the same shall
always be subject to the order that might be passed by the Delhi High
Court.
29. In view of the fact that this court while allowing the
application of the plaintiff has appointed Receiver for managing the
control and supervision of the property in question. Therefore, the
order passed by the Calcutta High Court appointing Receiver has to be
kept in abeyance as Calcutta High Court itself stated that decision of
Delhi High Court shall have precedence over their decision. This being
so, plea of the proposed defendant No. 10 that Receiver so appointed
by Calcutta High Court should continue, cannot be accepted.”
The learned Single Judge then considered the application filed by
respondent No.4 for amendment of the written statement and dismissed the
same by recording the following observations:
“True, law of amendment is quite liberal and Courts ordinarily permits
amendment provided such amendments are not mischievous in nature with
a view to delay the legal proceedings and setting up entirely new case
than the one pleaded earlier but in this case, I may say that written
statement was filed way back in 1993 and good number of years have
passed, but it never struck the defendant to make such amendment
simply by putting the blame on earlier lawyer. Even otherwise
amendment which is sought to be made was well within the knowledge of
defendant No. 3. During all these years when proceedings were
continuing that he was being termed as trespasser. What prevented him
to explain his true position at the earliest is not explained at all.
To me it seems that when arguments were being heard and the counsel
for the parties put up their respective claims then it has struck the
mind of defendant No. 3 to apply for such amendment as it might work
to his advantages. If at all he was in possession because of defendant
No.l's consent he should have pleaded so at the earliest. Such belated
amendment which is otherwise totally inconsistent to the stand taken
earlier in the written statement cannot be allowed as in that case it
would amount to take the case back to the year 1993 when the suit was
filed. Therefore this application has no merit, it being full of
malice, the same is dismissed.”
After about 11 years of the execution of agreements for sale in their
favour by respondent No.2, the appellants filed IA No.1861/2008 under Order
1 Rule 10(2) CPC for impleadment as defendants in Suit No. 425/1993. They
pleaded that by virtue of the agreements for sale and the sale deeds
executed by respondent No.2, they have become absolute owners of the suit
property and, as such, they are entitled to be impleaded as defendants in
the suit filed by respondent No.1. The appellants also invoked the
doctrine of lis pendens embodied in Section 52 of the Transfer of Property
Act, 1882 and pleaded that having purchased the property during the
pendency of the suit by respondent No.1, they have acquired the right to
contest the same. The appellants relied upon the orders passed by the Delhi
High Court in IA Nos. 625/2001, 1211/2001 and 9576/2001 to show that
respondent No.1 was very much aware of the agreements for sale and the sale
deeds executed in their favour by respondent No.2 and the agreement
executed by them in favour of Bhagwati Developers and pleaded that it was
the duty of respondent No.1 to have suo motu impleaded them as parties to
the suit. In the reply filed on behalf of respondent No.1, it was pleaded
that the suit for specific performance had been filed because respondent
No.2 did not execute the sale deed in furtherance of agreement for sale
dated 13.9.1988 and the appellants who are not parties to that agreement do
not have the locus to contest the suit. Respondent No.1 also raised an
objection of delay by asserting that the appellants had sought impleadment
after 11 years of having entered into a clandestine transaction with
respondent No.2. Respondent No. 1 relied upon orders dated 22.1.2001,
24.1.2001 and 8.2.2001 passed by the Delhi High Court and Suit No. 161/1999
field by respondent No.2 for grant of a declaration that the sale deeds
allegedly executed in favour of the appellants were forged and fabricated,
to show that the appellants were very much aware of Suit No.425/1993 and
pleaded that their assertion about lack of knowledge was false because they
had been contesting Suit No.161/1999 for almost 7 years. Another plea taken
by respondent No.1 was that the transactions entered into between
respondent No.2, the appellants and Bhagwati Developers were ex facie
illegal and on the basis of such transactions the appellants did not
acquire any right or interest in the suit property.
The learned Single Judge dismissed IA No. 1861/2008 vide order dated
26.5.2008, relevant extracts of which are reproduced below:
“The cumulative sequence of events noticed above leads this Court to
conclude that the vendor P.K. Khanna allegedly sold the properties in
1997. The applicants also claim as such. They were aware about the
existence of this suit if not in 1999 at least from 2001 onwards, when
they were made parties in an application and subject to an injunction.
Their conduct in approaching, for impleadment, now seven years later,
cannot be countenanced. That apart, as held in Kasturi's case their
impleadment would completely alter the nature of the suit which was
instituted in 1993 for specific performance of a contract, of 1988.
There is no whisper of leave having been obtained by their vendor, to
this transaction. The record shows that the vendor was admittedly
restrained by an injunction from parting with possession or creating
third party rights in respect of the suit property, on 18th February,
1993. That order was subsequently confirmed after hearing the
vendor/P.K. Khanna i.e. first defendant on 5th April, 1994. In view of
the principles spelt out in Bibi Zubaida Khatoon and Surjit Singh
accepting this application would defeat the ends of justice and
undermine public policy.”
20. Bhagwati Developers challenged order dated 3.9.2007 in FAO (OS) No.
514 of 2007. Respondent No.4 also challenged that order in FAO (OS) No. 400
of 2007. The appellants questioned order dated 26.5.2008 in FAO (OS) No.
324 of 2008. The Division Bench of the High Court dismissed all the appeals
and approved the orders passed by the learned Single Judge. The Division
Bench referred to order dated 15.2.2001 passed by the Calcutta High Court
and the judgments in Surjit Singh v. Harbans Singh (1995) 6 SCC 50, Jayaram
Mudaliar v. Ayyaswamia & Ors. (1972) 2 SCC 200, Rajender Singh & Ors. v.
Santa Singh & Ors. (1973) 2 SCC 705, Joginder Singh Bedi v. Sardar Singh &
Ors. 26 (1984) DLT 162 Del (DB) and Sanjay Gupta v. Kalawati & Ors. (1992)
53 DRJ 653 and held that the learned Single Judge was justified in
appointing a receiver for protecting the suit property because respondent
No.2 had flouted the injunction order with impunity and if the receiver was
not appointed there was every possibility of further alienation of the suit
property. Paragraph 26 of the impugned judgment in which the Division Bench
of the High Court enumerated the factors necessitating appointment of
receiver by the learned Single Judge and paragraph 33 are extracted below:
“26. Following developments and circumstances in this behalf need
mention and/or reiteration:
a) The suit filed by the plaintiff is predicated on agreement to sell
dated 13.9.1988 purportedly executed in its favour by the defendant
No.l, owner of the suit property, which is earliest transaction in
point of time.
b) Suit, on this basis, filed in April 1993 is also earliest legal
proceeding instituted by the plaintiff. In this suit, ad interim
injunction dated 18.2.1993 was passed restraining defendant Nos.1 &
3 from transferring, alienating or parting with possession of the
suit property in any manner or creating third party rights therein.
c) The plaintiff also filed another IA No.9154/1993 seeking restraint
against the defendant No.l as well as defendant No.3 from changing
the nature of the suit property by making structural changes,
additions or alterations therein. In this application orders were
passed directing them not to carry out any structural additions,
alterations and permitted only the renovations like painting,
polishing of the suit property.
d) In spite of the restraint order dated 18.2.1993, the defendant No.l
allegedly transferred the suit property by executing purported six
sale deeds on 28.5.1997 in favour of Vidur Impex & Traders and
others.
It is the submission of learned counsel appearing for the
plaintiff that intentionally six sale deeds were executed showing
consideration of Rs.48 lacs each keeping the same below the prescribed
limit of Rs.50 lacs with a fraudulent intent to avoid the application
of Chapter XX-C of the Income-Tax Act.
(e) On coming to know of the aforesaid sale
transactions, the plaintiff filed application under Order
XXXIX Rule 1 & 2 CPC for restraining the defendant
Nos.1 & 2 from transferring possession of the suit
property to the said six transferees under the alleged
six sale deeds. Restraint order to this effect was passed
by the learned Single Judge. Further orders were
passed restraining these six transferees (defendant
No.s 4 to 9) from acting upon the impugned sale
deeds.
(f) Defendant No.l in his reply took the stand that
impugned sale deeds were forged and fabricated and
were not executed by him. He even filed suit No.
161/1999 for declaration to this effect. However, this
suit was withdrawn on 10.1.2001 vide application IA
No. 255/2001 purported to have been moved by him
through Shri Bhupinder Singh, Advocate, on the
statement of Advocate without the presence of the
defendant No.l or his statement. Thereafter, IA No.1537/2001 was moved
by the defendant No.l stating that he had not authorized any counsel
to make an application for withdrawal of the suit and the whole
proceedings were collusive, fraudulent and that he had not entered
into any compromise with the said six transferees.
Though we are not
concerned with these proceedings, this fact is mentioned to highlight
the manner in which the transactions are taking place, that too in the
teeth of injunction order passed in Suit No.425/1993 and the
vacillating attitude of the defendant No.l (since deceased).
(g) Though there was restraint order against defendant Nos. 4 to 9,
i.e. Vidur Impex & Traders and others, not to act upon the impugned
sale deeds, they entered into agreement dated 18.3.1997 for transfer
of their purported rights and interest in the suit property in favour
of Bhagwati Developers. This agreement contained an arbitration
clause, on the basis of which the Arbitrator was appointed and consent
award passed. Again, without commenting upon the validity or otherwise
of such proceedings, which would naturally be thrashed out in
appropriate proceedings, suffice it to state was that all this was
happening in violation of the injunction order passed in the instant
suit. Attempt was made to get the Receiver appointed from the Calcutta
High Court and take possession of the suit property.
33. In this behalf, we agree with the submission of Mr. Singhvi,
learned senior counsel for the plaintiff, that in a suit for specific
performance, the court has ample power and jurisdiction to appoint a
receiver, in Kerr on Receivers 16th Edition (on page 58), it has been
laid down that if a fair prima facie case for the specific performance
of a contract is made to appear, the court may interfere upon motion
and appoint receiver. In Foot Note No. 37, reference has been made to
case law including C. Kennedy v. Lee (1870) 3 MER 441, M. cloudy.
Phelp (1838) 2 JUR 962. The appointment may be made in such
circumstances before the order for a sale is made absolute. (Re:
Stephard, (1892) 31 IR 95).”
The Division Bench approved the rejection of the appellants’ prayer for
impleadment as parties in Suit No. 425/1993 by observing that after
executing the agreement for sale in favour of Bhagwati Developers they do
not have any subsisting interest in the property. The Division Bench also
agreed with the learned Single Judge that the application filed by the
appellants lacked bona fides because they purchased the suit property from
respondent No.2 despite the order of injunction passed by the High Court
and there was no tangible explanation for filing the application after a
long time gap of about 8 years.
Learned senior counsel for the appellants emphasised that his clients were
not aware of the agreement for sale executed by respondent No.2 in favour
of respondent No.1, the suit for specific performance and permanent
injunction filed by respondent No.1 in the Delhi High Court and injunction
order dated 18.2.1993 till January, 2001 when the learned Single Judge
restrained respondent Nos.2 and 4 from transferring possession of the suit
property to the appellants, and argued that the High Court committed
serious error by declining their prayer for impleadment as parties to the
suit. He submitted that the appellants are bona fide purchasers for
consideration and are entitled to contest the suit filed by respondent
No.1, else their right in the suit property will get jeopardized. Learned
senior counsel then argued that the agreement for sale executed by the
appellants in favour of Bhagwati Developers did not result in alienation of
the suit property and the High Court committed an error in holding that the
appellants had no subsisting right in the subject matter of the suit. He
relied upon the judgments of this Court in Nagubai Ammal v. B Shama Rao AIR
1956 SC 593, Khemchand S. Choudhari v. Vishnu Hari (1983) 1 SCC 18 ,
Savitri Devi v. DJ, Gorakhpur (1999) 2 SCC 577, Kasturi v. Iyyamperumal
(2005) 6 SCC 733, Amit Kumar Shaw v. Farida Khatoon (2005) 11 SCC 403,
Mumbai International Airport (P) Ltd. v. Regency Convention Centre and
Hotels (P) Ltd. (2010) 7 SCC 417 and Vinod Seth v. Devinder Bajaj (2010) 8
SCC 1, and argued that respondent No.1 should be directed to implead the
appellants as parties to the suit because their rights will be adversely
affected if a decree is passed in favour of respondent No.1. Learned
senior counsel submitted that impleadment of the appellants will enable the
Court to comprehensively decide all the issues and will also obviate the
necessity of further litigation in the matter.
Learned senior counsel appearing for Bhagawati Developers invoked the
doctrine of comity of jurisdiction of the Courts and argued that in view of
the order passed by the Calcutta High Court for appointment of receiver who
had already taken possession of the suit property, the Delhi High Court
should have refrained from exercising its power to appoint receiver with a
direction to him to take over the property.
Learned senior counsel for respondent No. 1 relied on Surjit Singh v.
Harbans Singh (supra) and argued that the appellants are neither necessary
nor proper parties because the agreements for sale and the sale deeds
executed by respondent No.2 in their favour had no legal sanctity. Learned
senior counsel submitted that the alienation of suit property by respondent
No.2 in violation of the injunction granted by the Delhi High Court was
nullity and such a transaction did not create any right in favour of the
appellants or Bhagwati Developers so as to entitle them to contest the
litigation pending between respondent Nos.1 and 2. Learned senior counsel
submitted that in a suit for specific performance, any transfer which takes
place in violation of an injunction granted by the Court would be hit by
the doctrine of lis pendens enshrined in Section 52 of the Transfer of
Property Act, 1882. Learned senior counsel further submitted that on the
date of filing IA No.1861/2008 the appellants did not have any subsisting
interest in the suit property because they had already executed an
agreement for sale in favour of Bhagwati Developers and received
substantial part of the consideration and the mere fact that they were made
parties in the interlocutory applications filed before the Delhi High Court
cannot entitle them to seek impleadment as defendants in the pending suit.
Learned senior counsel then argued that the agreement to sell executed
between the appellants and Bhagwati Developers and the proceedings
instituted before the Calcutta High Court were collusive and fraudulent and
the appellants and Bhagwati Developers cannot take benefit of the order
passed by that Court. He emphasized that even though the appellants and
Bhagwati Developers had knowledge of the suit pending before the Delhi High
Court, they deliberately suppressed this fact from the Calcutta High Court
and succeeded in persuading the Court to appoint an arbitrator and a
receiver. Learned senior counsel submitted that the doctrine of comity of
jurisdictions cannot be invoked by Bhagwati Developers because the Delhi
High Court was already seized of the matter and the application filed by
respondent No.1 for appointment of receiver was pending since 1998. Learned
senior counsel lastly argued that the Delhi High Court did not commit any
error by appointing a receiver because respondent Nos.2, 4, the appellants
and Bhagwati Developers tried to grab the suit property by entering into
clandestine transactions.
We have considered the respective arguments/submissions. The first
question that requires determination is whether the appellants are entitled
to be impleaded as parties in Suit No. 425/1993 on the ground that during
the pendency of the suit they had purchased the property from respondent
No.2. Order 1 Rule 10(2) CPC which empowers the Court to delete or add
parties to the suit reads as under:
“10 (2) Court may strike out or add parties - The Court may at any
stage of the proceedings, either upon or without the application of
either party, and on such terms as may appear to the Court to be just,
order that the name of any party improperly joined, whether as
plaintiff or defendant, be struck out, and that the name, of any
person who ought to have been joined, whether as plaintiff or
defendant, or whose presence before the Court may be necessary in
order to enable the Court effectually and completely to adjudicate
upon and settle all the questions involved in the suit, be added.”
In Ramesh Hirachand Kundanmal v. Municipal Corporation of Greater Bombay
(1992) 2 SCC 524, this Court interpreted the aforesaid provision and held:
“Sub-rule (2) of Rule 10 gives a wide discretion to the Court to meet
every case of defect of parties and is not affected by the inaction of
the plaintiff to bring the necessary parties on record. The question
of impleadment of a party has to be decided on the touchstone of Order
1 Rule 10 which provides that only a necessary or a proper party may
be added. A necessary party is one without whom no order can be made
effectively. A proper party is one in whose absence an effective order
can be made but whose presence is necessary for a complete and final
decision on the question involved in the proceeding. The addition of
parties is generally not a question of initial jurisdiction of the
Court but of a judicial discretion which has to be exercised in view
of all the facts and circumstances of a particular case.”
(emphasis supplied)
27. In Anil Kumar Singh v. Shivnath Mishra (1995) 3 SCC 147, this Court
interpreted Order 1 Rule 10(2) in the following manner:
“By operation of the above-quoted rule though the court may have power
to strike out the name of a party improperly joined or add a party
either on application or without application of either party, but the
condition precedent is that the court must be satisfied that the
presence of the party to be added, would be necessary in order to
enable the court to effectually and completely adjudicate upon and
settle all questions involved in the suit. To bring a person as party-
defendant is not a substantive right but one of procedure and the
court has discretion in its proper exercise. The object of the rule is
to bring on record all the persons who are parties to the dispute
relating to the subject-matter so that the dispute may be determined
in their presence at the same time without any protraction,
inconvenience and to avoid multiplicity of proceedings.”
28. In Mumbai International Airport (P) Ltd. v. Regency Convention Centre
and Hotels (P) Ltd. (supra), this Court considered the scope of Order 1
Rule 10(2) CPC and observed:
“ The general rule in regard to impleadment of parties is that the
plaintiff in a suit, being dominus litis, may choose the persons
against whom he wishes to litigate and cannot be compelled to sue a
person against whom he does not seek any relief. Consequently, a
person who is not a party has no right to be impleaded against the
wishes of the plaintiff. But this general rule is subject to the
provisions of Order 1 Rule 10(2) of the Code of Civil Procedure (“the
Code”, for short), which provides for impleadment of proper or
necessary parties. The said sub-rule is extracted below:
“10. (2) Court may strike out or add parties.—The court may at any
stage of the proceedings, either upon or without the application of
either party, and on such terms as may appear to the court to be just,
order that the name of any party improperly joined, whether as
plaintiff or defendant, be struck out, and that the name of any person
who ought to have been joined, whether as plaintiff or defendant, or
whose presence before the court may be necessary in order to enable
the court effectually and completely to adjudicate upon and settle all
the questions involved in the suit, be added.”
The said provision makes it clear that a court may, at any stage of
the proceedings (including suits for specific performance), either
upon or even without any application, and on such terms as may appear
to it to be just, direct that any of the following persons may be
added as a party: (a) any person who ought to have been joined as
plaintiff or defendant, but not added; or (b) any person whose
presence before the court may be necessary in order to enable the
court to effectively and completely adjudicate upon and settle the
questions involved in the suit. In short, the court is given the
discretion to add as a party, any person who is found to be a
necessary party or proper party.
A “necessary party” is a person who ought to have been joined as a
party and in whose absence no effective decree could be passed at all
by the court. If a “necessary party” is not impleaded, the suit itself
is liable to be dismissed. A “proper party” is a party who, though not
a necessary party, is a person whose presence would enable the court
to completely, effectively and adequately adjudicate upon all matters
in dispute in the suit, though he need not be a person in favour of or
against whom the decree is to be made. If a person is not found to be
a proper or necessary party, the court has no jurisdiction to implead
him, against the wishes of the plaintiff. The fact that a person is
likely to secure a right/interest in a suit property, after the suit
is decided against the plaintiff, will not make such person a
necessary party or a proper party to the suit for specific
performance.
Let us consider the scope and ambit of Order 1 Rule 10(2) CPC
regarding striking out or adding parties. The said sub-rule is not
about the right of a non-party to be impleaded as a party, but about
the judicial discretion of the court to strike out or add parties at
any stage of a proceeding. The discretion under the sub-rule can be
exercised either suo motu or on the application of the plaintiff or
the defendant, or on an application of a person who is not a party to
the suit. The court can strike out any party who is improperly joined.
The court can add anyone as a plaintiff or as a defendant if it finds
that he is a necessary party or proper party. Such deletion or
addition can be without any conditions or subject to such terms as the
court deems fit to impose. In exercising its judicial discretion under
Order 1 Rule 10(2) of the Code, the court will of course act according
to reason and fair play and not according to whims and caprice.”
(emphasis supplied)
29. In Kasturi v. Iyyamperumal (supra), this Court considered the
question whether a person who sets up independent title and claims
possession of the suit property is entitled to be impleaded as party to a
suit for specific performance of contract entered into between the
plaintiff and the defendant. In that case, the trial Court allowed the
application for impleadment on the ground that respondent Nos.1 and 4 to 11
were claiming title and possession of the contracted property and,
therefore, they will be deemed to have direct interest in the subject
matter of the suit. The High Court dismissed the revision filed by the
appellant and confirmed the order of the trial Court. While allowing the
appeal and setting aside the orders of the trial Court and the High Court,
this Court referred to Order 1 Rule 10(2) CPC and observed:
“In our view, a bare reading of this provision, namely, second part of
Order 1 Rule 10 sub-rule (2) CPC would clearly show that the necessary
parties in a suit for specific performance of a contract for sale are
the parties to the contract or if they are dead, their legal
representatives as also a person who had purchased the contracted
property from the vendor. In equity as well as in law, the contract
constitutes rights and also regulates the liabilities of the parties.
A purchaser is a necessary party as he would be affected if he had
purchased with or without notice of the contract, but a person who
claims adversely to the claim of a vendor is, however, not a necessary
party. From the above, it is now clear that two tests are to be
satisfied for determining the question who is a necessary party. Tests
are — (1) there must be a right to some relief against such party in
respect of the controversies involved in the proceedings; (2) no
effective decree can be passed in the absence of such party.
As noted hereinearlier, two tests are required to be satisfied to
determine the question who is a necessary party, let us now consider
who is a proper party in a suit for specific performance of a contract
for sale. For deciding the question who is a proper party in a suit
for specific performance the guiding principle is that the presence of
such a party is necessary to adjudicate the controversies involved in
the suit for specific performance of the contract for sale. Thus, the
question is to be decided keeping in mind the scope of the suit. The
question that is to be decided in a suit for specific performance of
the contract for sale is to the enforceability of the contract entered
into between the parties to the contract. If the person seeking
addition is added in such a suit, the scope of the suit for specific
performance would be enlarged and it would be practically converted
into a suit for title. Therefore, for effective adjudication of the
controversies involved in the suit, presence of such parties cannot be
said to be necessary at all. Lord Chancellor Cottenham in Tasker v.
Small made the following observations:
“It is not disputed that, generally, to a bill for a specific
performance of a contract of sale, the parties to the contract only
are the proper parties; and, when the ground of the jurisdiction of
Courts of Equity in suits of that kind is considered it could not
properly be otherwise. The Court assumes jurisdiction in such cases,
because a court of law, giving damages only for the non-performance of
the contract, in many cases does not afford an adequate remedy. But,
in equity, as well as at law, the contract constitutes the right, and
regulates the liabilities of the parties; and the object of both
proceedings is to place the party complaining as nearly as possible in
the same situation as the defendant had agreed that he should be
placed in. It is obvious that persons, strangers to the contract, and,
therefore, neither entitled to the right, nor subject to the
liabilities which arise out of it, are as much strangers to a
proceeding to enforce the execution of it as they are to a proceeding
to recover damages for the breach of it.”
The aforesaid decision in Tasker was noted with approval in De Hoghton
v. Mone. Turner, L.J. observed:
“Here again his case is met by Tasker in which case it was distinctly
laid down that a purchaser cannot, before his contract is carried into
effect, enforce against strangers to the contract equities attaching
to the property, a rule which, as it seems to me, is well founded in
principle, for if it were otherwise, this Court might be called upon
to adjudicate upon questions which might never arise, as it might
appear that the contract either ought not to be, or could not be
performed.”
(emphasis supplied)
30. In Amit Kumar Shaw v. Farida Khatoon (supra), this Court
examined the correctness of the order passed by the Calcutta High Court
which had approved the dismissal of the application filed by the appellants
for impleadment as parties to the suit filed by the original owner Khetra
Mohan Das and the transferees, namely, Birendra Nath Dey and Smt. Kalyani
Dey. One Fakir Mohammad claimed right, title and interest in the suit
property by adverse possession. The suit was decreed by the trial Court.
On appeal, the same was remanded for fresh adjudication of the claim of the
parties. Fakir Mohammad challenged the order of remand by filing two
second appeals. During the pendency of the appeals, Birendra Nath Dey
assigned leasehold interest in respect of a portion of the suit property to
the appellants. Smt. Kalyani Dey sold the other portion of the suit
property to the appellants. When the appellants applied for recording
their names in the municipal records, they came to know about the pendency
of the appeals. Immediately thereafter, they filed an application for
impleadment which was rejected by the High Court. This Court referred to
the provision of Order 1 Rule 10(2) and Order 22 Rule 10 CPC as also
Section 52 of the Transfer of Property Act, 1882 and observed:
“Section 52 of the Transfer of Property Act is an expression of the
principle “pending a litigation nothing new should be introduced”. It
provides that pendente lite, neither party to the litigation, in which
any right to immovable property is in question, can alienate or
otherwise deal with such property so as to affect his appointment.
This section is based on equity and good conscience and is intended to
protect the parties to litigation against alienations by their
opponent during the pendency of the suit. In order to constitute a lis
pendens, the following elements must be present:
1. There must be a suit or proceeding pending in a court of competent
jurisdiction.
2. The suit or proceeding must not be collusive.
3. The litigation must be one in which right to immovable property is
directly and specifically in question.
4. There must be a transfer of or otherwise dealing with the property
in dispute by any party to the litigation.
5. Such transfer must affect the rights of the other party that may
ultimately accrue under the terms of the decree or order.
The doctrine of lis pendens applies only where the lis is pending
before a court. Further pending the suit, the transferee is not
entitled as of right to be made a party to the suit, though the court
has a discretion to make him a party. But the transferee pendente lite
can be added as a proper party if his interest in the subject-matter
of the suit is substantial and not just peripheral. A transferee
pendente lite to the extent he has acquired interest from the
defendant is vitally interested in the litigation, where the transfer
is of the entire interest of the defendant; the latter having no more
interest in the property may not properly defend the suit. He may
collude with the plaintiff. Hence, though the plaintiff is under no
obligation to make a lis pendens transferee a party, under Order 22
Rule 10 an alienee pendente lite may be joined as party. As already
noticed, the court has discretion in the matter which must be
judicially exercised and an alienee would ordinarily be joined as a
party to enable him to protect his interests.”
(emphasis supplied)
31. In Savitri Devi v. DJ, Gorakhpur (supra), this Court upheld the order
passed by the trial Court for impleadment of respondent Nos.3 to 5, who had
purchased the suit property without knowledge of the pending litigation, as
parties. On behalf of the appellant, it was argued that respondent Nos. 3
to 5 cannot be treated as necessary parties because alienation made in
their favour was in violation of the injunction order passed by the Court.
In support of this argument, reliance was placed on the judgment in Surjit
Singh v. Harbans Singh (supra). This Court distinguished that judgment by
observing that in that case the assignors and the assignees had knowledge
of the injunction order passed by the Court and held that the order passed
by the trial Court which was affirmed by the District Judge and the High
Court does not call for interference.
32. In Vinod Seth v. Devinder Bajaj (supra), this Court interpreted
Section 52 of the Transfer of Property Act, 1882 and observed:
“It is well settled that the doctrine of lis pendens does not annul
the conveyance by a party to the suit, but only renders it subservient
to the rights of the other parties to the litigation. Section 52 will
not therefore render a transaction relating to the suit property
during the pendency of the suit void but render the transfer
inoperative insofar as the other parties to the suit. Transfer of any
right, title or interest in the suit property or the consequential
acquisition of any right, title or interest, during the pendency of
the suit will be subject to the decision in the suit.
The principle underlying Section 52 of the TP Act is based on justice
and equity. The operation of the bar under Section 52 is however
subject to the power of the court to exempt the suit property from the
operation of Section 52 subject to such conditions it may impose. That
means that the court in which the suit is pending, has the power, in
appropriate cases, to permit a party to transfer the property which is
the subject-matter of the suit without being subjected to the rights
of any part to the suit, by imposing such terms as it deems fit.
Having regard to the facts and circumstances, we are of the view that
this is a fit case where the suit property should be exempted from the
operation of Section 52 of the TP Act, subject to a condition relating
to reasonable security, so that the defendants will have the liberty
to deal with the property in any manner they may deem fit, in spite of
the pendency of the suit.”
33. In Surjit Singh v. Harbans Singh (supra), this Court considered the
question whether a person to whom the suit property is alienated after
passing of the preliminary decree by the trial Court, which had restrained
the parties from alienating or otherwise transferring the suit property,
has the right to be impleaded as party. The trial Court accepted the
application filed by the transferees and the order of the trial Court was
confirmed by the lower appellate Court and the High Court. While allowing
the appeal against the order of the High Court, this Court observed:
“In defiance of the restraint order, the alienation/assignment was
made. If we were to let it go as such, it would defeat the ends of
justice and the prevalent public policy. When the Court intends a
particular state of affairs to exist while it is in seisin of a lis,
that state of affairs is not only required to be maintained, but it is
presumed to exist till the Court orders otherwise. The Court, in these
circumstances has the duty, as also the right, to treat the
alienation/assignment as having not taken place at all for its
purposes. Once that is so, Pritam Singh and his assignees, respondents
herein, cannot claim to be impleaded as parties on the basis of
assignment. Therefore, the assignees-respondents could not have been
impleaded by the trial court as parties to the suit, in disobedience
of its orders.”
34. In Sarvinder Singh v. Dalip Singh (1996) 5 SCC 539, this Court
considered the question whether the respondent who purchased the property
during the pendency of a suit for declaration filed by the appellant on the
basis of the registered Will executed by his mother is entitled to be
impleaded as party and observed:
“The respondents indisputably cannot challenge the legality or the
validity of the Will executed and registered by Hira Devi on 26-5-
1952. Though it may be open to the legal heirs of Rajender Kaur, who
was a party to the earlier suit, to resist the claim on any legally
available or tenable grounds, those grounds are not available to the
respondents. Under those circumstances, the respondents cannot, by any
stretch of imagination, be said to be either necessary or proper
parties to the suit. A necessary party is one whose presence is
absolutely necessary and without whose presence the issue cannot
effectually and completely be adjudicated upon and decided between the
parties. A proper party is one whose presence would be necessary to
effectually and completely adjudicate upon the disputes. In either
case the respondents cannot be said to be either necessary or proper
parties to the suit in which the primary relief was found on the basis
of the registered Will executed by the appellant's mother, Smt Hira
Devi. Moreover, admittedly the respondents claimed right, title and
interest pursuant to the registered sale deeds said to have been
executed by the defendants-heirs of Rajender Kaur on 2-12-1991 and 12-
12-1991, pending suit.
Section 52 of the Transfer of Property Act envisages that:
“During the pendency in any court having authority within the limits
of India ... of any suit or proceeding which is not collusive and in
which any right to immovable property is directly and specifically in
question, the property cannot be transferred or otherwise dealt with
by any party to the suit or proceeding so as to affect the rights of
any other party thereto under the decree or order which may be made
therein, except under the authority of the court and on such terms as
it may impose.”
It would, therefore, be clear that the defendants in the suit were
prohibited by operation of Section 52 to deal with the property and
could not transfer or otherwise deal with it in any way affecting the
rights of the appellant except with the order or authority of the
court. Admittedly, the authority or order of the court had not been
obtained for alienation of those properties. Therefore, the alienation
obviously would be hit by the doctrine of lis pendens by operation of
Section 52. Under these circumstances, the respondents cannot be
considered to be either necessary or proper parties to the suit.”
(emphasis supplied)
35. In Bibi Zubaida Khatoon v. Nabi Hassan (2004) 1 SCC 191, this Court
was called upon to consider the correctness of the High Court’s order,
which declined to interfere with the order passed by the trial Court
dismissing the applications filed by the appellant for impleadment as party
to the cross suits of which one was filed for redemption of mortgage and
the other was filed for specific performance of the agreement for sale.
While dismissing the appeal, this Court referred to the judgments in
Sarvinder Singh v. Dalip Singh (supra) and Dhurandhar Prasad Singh v. Jai
Prakash University (2001) 6 SCC 534 and observed that there is no absolute
rule that the transferee pendente lite shall be allowed to join as party in
all cases without leave of the Court and contest the pending suit.
36. Though there is apparent conflict in the observations made in some of
the aforementioned judgments, the broad principles which should govern
disposal of an application for impleadment are:
1. The Court can, at any stage of the proceedings, either on an
application made by the parties or otherwise, direct impleadment of
any person as party, who ought to have been joined as plaintiff or
defendant or whose presence before the Court is necessary for
effective and complete adjudication of the issues involved in the
suit.
2. A necessary party is the person who ought to be joined as party to
the suit and in whose absence an effective decree cannot be passed by
the Court.
3. A proper party is a person whose presence would enable the Court to
completely, effectively and properly adjudicate upon all matters and
issues, though he may not be a person in favour of or against whom a
decree is to be made.
4. If a person is not found to be a proper or necessary party, the Court
does not have the jurisdiction to order his impleadment against the
wishes of the plaintiff.
5. In a suit for specific performance, the Court can order impleadment
of a purchaser whose conduct is above board, and who files application
for being joined as party within reasonable time of his acquiring
knowledge about the pending litigation.
6. However, if the applicant is guilty of contumacious conduct or is
beneficiary of a clandestine transaction or a transaction made by the
owner of the suit property in violation of the restraint order passed
by the Court or the application is unduly delayed then the Court will
be fully justified in declining the prayer for impleadment.
37. In the light of the above, we shall now consider whether the learned
Single Judge and the Division Bench of the High Court committed an error by
dismissing the appellants’ application for impleadment as parties to Suit
No.425/1993. At the cost of repetition, we consider it necessary to
mention that respondent No.1 had filed suit for specific performance of
agreement dated 13.9.1988 executed by respondent No.1. The appellants and
Bhagwati Developers are total strangers to that agreement. They came into
the picture only when respondent No.2 entered into a clandestine
transaction with the appellants for sale of the suit property and executed
the agreements for sale, which were followed by registered sale deeds and
the appellants executed agreement for sale in favour of Bhagwati
Developers. These transactions were in clear violation of the order of
injunction passed by the Delhi High Court which had restrained respondent
No.2 from alienating the suit property or creating third party interest.
To put it differently, the agreements for sale and the sale deeds executed
by respondent No.2 in favour of the appellants did not have any legal
sanctity. The status of the agreement for sale executed by the appellants
in favour of Bhagwati Developers was no different. These transactions did
not confer any right upon the appellants or Bhagwati Developers. Therefore,
their presence is not at all necessary for adjudication of the question
whether respondent Nos.1 and 2 had entered into a binding agreement and
whether respondent No.1 is entitled to a decree of specific performance of
the said agreement. That apart, after executing agreement for sale dated
18.3.1997 in favour of Bhagwati Developers, the appellants cannot claim to
have any subsisting legal or commercial interest in the suit property and
they cannot take benefit of the order passed by the Calcutta High Court for
appointment of an arbitrator which was followed by an order for appointment
of receiver because the parties to the proceedings instituted before that
Court deliberately suppressed the facts relating to Suit No.425/1993
pending before the Delhi High Court and the orders of injunction passed in
that suit.
38. We are in complete agreement with the Delhi High Court that the
application for impleadment filed by the appellants was highly belated.
Although, the appellants have pleaded that at the time of execution of the
agreements for sale by respondent No.2 in their favour in February 1997,
they did not know about the suit filed by respondent No.1, it is difficult,
if not impossible, to accept their statement because the smallness of time
gap between the agreements for sale and the sale deeds executed by
respondent No.2 in favour of the appellants and the execution of agreement
for sale by the appellants in favour of Bhagwati Developers would make any
person of ordinary prudence to believe that respondent No.2, the appellants
and Bhagwati Developers had entered into these transactions with the sole
object of frustrating agreement for sale dated 13.9.1988 executed in favour
of respondent No.1 and the suit pending before the Delhi High Court. In
any case, the appellants will be deemed to have become aware of the same on
receipt of summons in Suit No.161/1999 filed by respondent No.2 for
annulment of the agreements for sale and the sale deeds in which respondent
No.2 had clearly made a mention of Suit No.425/1993 filed by respondent
No.1 for specific performance of agreement for sale dated 13.12.1988 and
injunction or at least when the learned Single Judge of the Delhi High
Court entertained IA No.625/2001 filed by respondent No.1 and restrained
respondent Nos.2 and 4 from transferring possession of the suit property to
the appellants. However, in the application for impleadment filed by them,
the appellants did not offer any tangible explanation as to why the
application for impleadment was filed only on 4.2.2008 i.e. after 7 years
of the passing of injunction order dated 22.1.2001 and, in our considered
view, this constituted a valid ground for declining their prayer for
impleadment as parties to Suit No.425/1993.
39. The ratio of the judgment in Kasturi v. Iyyamperumal (supra), on
which heavy reliance has been placed by the learned senior counsel for the
appellants, does not help his clients. In the present case, the agreements
for sale and the sale deeds were executed by respondent No.2 in favour of
the appellants in a clandestine manner and in violation of the injunction
granted by the High Court. Therefore, it cannot be said that any valid
title or interest has been acquired by the appellants in the suit property
and the ratio of the judgment in Surjit Singh v. Harbans Singh (supra)
would squarely apply to the appellants’ case because they are claiming
right on the basis of transactions made in defiance of the restraint order
passed by the High Court. The suppression of material facts by Bhagwati
Developers and the appellants from the Calcutta High Court, which was
persuaded to pass orders in their favour, takes the appellants out of the
category of bona fide purchaser. Therefore, their presence is neither
required to decide the controversy involved in the suit filed by respondent
No.1 nor required to pass an effective decree.
40. The next question which merits consideration is whether the Delhi
High Court was justified in appointing the receiver and directing him to
take possession of the property. Though, learned senior counsel appearing
for Bhagwati Developers has sought to invoke the doctrine of comity of
jurisdictions of the Courts for continuance of the receiver appointed by
the Calcutta High Court, we do not find any merit in his submission. It is
not in dispute that respondent No.1 had filed the suit for specific
performance on 1.2.1993 and the learned Single Judge of the Delhi High
Court passed the order of injunction on 18.2.1993. The arbitral award for
specific performance of the agreement for sale of the same property entered
into between the appellants and Bhagawati Developers was obtained on
7.1.1999. The execution proceedings were instituted in the Calcutta High
Court in 2000 and the order for appointment of receiver was passed on
12.8.2000. It is thus clear that when Bhagwati Developers approached the
Calcutta High Court, the Delhi High Court was already seized with the suit
involving the subject matter of the award. The contention of the appellants
and Bhagawati Developers that they were unaware of the proceedings before
the Delhi High Court cannot be accepted because in Suit No.161/1999 filed
by respondent No.2 for declaring that the agreements for sale and the sale
deeds relied upon by the appellants were false and fabricated, a specific
reference was made to the suit filed by respondent No.1. That apart, in its
order dated 15.2.2001 passed in the application filed by respondent No.4 in
EC No.10/2000, the learned Single Judge of the Calcutta High Court
categorically observed that the said Court had not been apprised of the
facts relating to the suit pending before the Delhi High Court and the
injunction orders passed therein including order dated 8.2.2001 restraining
the receiver of the Calcutta High Court from taking possession of the
property and that if these facts had been disclosed, the Court would have
been slow in passing the order that it had passed earlier and hence the
order passed by it, if it is in conflict with the order passed by the Delhi
High Court, would be subject to that order and Bhagawati Developers who is
a party to the proceedings before the Delhi High Court can approach the
said Court for obtaining appropriate orders. This shows that on being
apprised of the correct facts, the learned Single Judge of the Calcutta
High Court had shown due respect to the orders passed by the Delhi High
Court and directed that the same should operate till they are modified or
vacated at the instance of the appellants or Bhagwati Developers. The
course of action adopted by the Calcutta High Court was in consonance with
the notion of judicial propriety. Therefore, Bhagwati Developers cannot
invoke the doctrine of comity of jurisdictions of the Courts for seeking
continuance of the receiver appointed by the Calcutta High Court.
41. The learned Single Judge and the Division Bench of the Delhi High
Court have assigned detailed and cogent reasons for appointing a receiver
to take care of the suit property. The clandestine nature of the
transactions entered into between respondent No.2 and the appellants on the
one hand and the appellants and Bhagwati Developers on the other would give
rise to strong presumption that if a receiver is not appointed, further
attempts would be made to alienate the property in similar fashion.
Therefore, we do not find any valid ground much less justification to
interfere with the impugned order or the one passed by the learned Single
Judge of the Delhi High Court.
42. In view of the above conclusions, we do not consider it necessary to
advert to the documents filed by respondent No.1 before this Court for the
first time and the additional affidavit filed by Smt. Bhanwari Devi Lodha
on behalf of Bhagwati Developers.
43. In the result, the appeals are dismissed. For their contumacious
conduct of suppressing facts from the Calcutta High Court and thereby
prolonging the litigation, the appellants and Bhagwati Developers are
saddled with cost of Rs.5 lakhs each. The amount of cost shall be
deposited by them with the Supreme Court Legal Services Committee within a
period of three months.
44. Since the proceedings pending before the Delhi High Court were stayed
by this Court, we request the High Court to make an endeavour to dispose of
the pending suit as early as possible.
…...……..….………………….…J.
[G.S. Singhvi]
…………..….………………….…J.
[Sudhansu Jyoti Mukhopadhaya]
New Delhi,
August 21, 2012.
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