whether a vendee who does not perform one of his promises in a contract can obtain the discretionary relief of specific performance of that very contract.= Explanation (ii) to Section 16(c) of The Specific Relief Act lays down that it is incumbent on the party, who wants to enforce the specific performance of a contract, to aver and prove that he has performed or has always been ready and willing to perform the essential terms of the contract. This the plaintiff miserably failed to do in so far as payment of rent is concerned.- Sub clause(c) of sub­section (2) of Section 20 provides that even if the contract is otherwise not voidable but the circumstances make it inequitable to enforce specific performance, the Court can refuse to grant such discretionary relief. Explanation (2) to the Section provides that the hardship has to be considered at the time of the contract, unless the hardship is brought in by the action of the plaintiff.- In this case, Bahadur Singh having got possession of the land in the year 1964 did not pay the rent for 13 long years and even when he filed the replication in the year 1978, he denied any liability to pay the customary rent. Therefore, in our opinion, he did not act in a proper manner. Equity is totally against him. In our considered view, he was not entitled to claim the discretionary relief of specific performance of the agreement having not performed his part of the contract even if that part is held to be a distinct part of the agreement to sell. The land was agricultural land. Bahadur Singh was cultivating the same. He must have been earning a fairly large amount from this land which measured about 9½ acres. He by not paying the rent did not act fairly and, in our opinion, forfeited his right to get the discretionary relief of specific performance.

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 7424­7425 OF 2011
SURINDER KAUR (D) THR. LR. JASINDERJIT
SINGH (D) THR. LRS.                 …  APPELLANT(S)
VERSUS
BAHADUR SINGH (D) THR. LRS.               …RESPONDENT(S)
J U D G E M E N T
Deepak Gupta, J.
The question of law arising in these appeals is whether a
vendee who does not perform one of his promises in a contract
can obtain the discretionary relief of specific performance of that
very contract.
2. Briefly stated the facts are that Mohinder Kaur, predecessor
in   interest   of   the   appellants   entered   into   an   agreement   with
2
Bahadur Singh, predecessor in interest of the respondents on
13.05.1964 whereby she agreed to sell the suit land to Bahadur
Singh for a total sale consideration of Rs.5605/­.   Out of this,
Rs.1000/­ was paid as earnest money at the time of execution of
agreement to sell, and it was agreed that the balance amount
would be paid at the time of registration of the sale deed.  The
possession of the land was handed over to the vendee on the date
of agreement to sell itself.  Since there was some litigation with
regard to the property it was agreed between the parties that the
sale deed would be executed within one month from the date of
decision of civil appeal pending before the Punjab and Haryana
High Court.
3. To decide the appeals, it would be necessary to refer to
Clauses 2 and 3 of the agreement to sell which read as under:­
“ xxx             xxx                       xxx
2) That an appeal in respect of the above­mentioned
land is pending in the High Court and after decision in the
said appeal, the First Party shall execute and register Sale
Deed in favour of the Second Party in the month of July, 1965.
3) That the possession of the land has been handed
today and in case the decision by the High Court in the appeal
is after one year, then the sale deed shall be executed and
registered after one month from the date of decision and in the
3
circumstance, the Second Party shall pay to the First party the
customary rent for the said land.
xxx             xxx                       xxx ”
4. It   is   not   disputed   that   the   litigation   referred   to   in   the
agreement was decided on 17.01.1977, i.e., about 13 years after
the   agreement   to   sell   was   entered   into.     Bahadur   Singh
requested Mohinder Kaur to execute the sale deed but since she
failed to do so, a suit for specific performance of the agreement
was filed by Bahadur Singh.   In the alternative, it was prayed
that a decree be passed for a sum of Rs.5605/­, i.e. Rs.1000/­
paid as earnest money and Rs.4605/­ as damages.   This suit
was contested on various grounds but we are concerned with
only   one   wherein   the   defendant   raised   the   plea   that   since
Bahadur Singh had admittedly failed to pay the rent of the land
in terms of Clause 3 of the agreement, he was not entitled to a
decree for specific performance.
5. The suit has been decreed by all the courts below.  There is
no dispute with regard to the factual aspects. The only issue is
whether the vendee Bahadur Singh who admittedly did not pay
the rent is entitled to a decree of specific performance of the
agreement dated 13.05.1964.  The courts below have held that
4
the   agreement   contained   several   promises   which   may   be
reciprocal, contingent or separate.  Section 511
 of the Contract
Act,1872 provides that when a contract consists of  reciprocal
promises to be simultaneously performed, no promisor needs to
perform his promise unless the promisee is ready and willing to
perform his reciprocal promise.
6. The aforesaid provisions have to be read along with Section
16(c)2
  of The Specific Relief Act, 1963 which clearly lays down
that the specific performance of a contract cannot be enforced in
favour of a person who fails to prove that he has performed or
was always ready and willing to perform the essential terms of
the contract which were to be performed by him.
1  51. Promisor not bound to perform, unless reciprocal promisee ready and willing to perform.
—When a contract consists of reciprocal promises to be simultaneously performed, no promisor need
perform his promise unless the promisee is ready and willing to perform his reciprocal promise.
2
2 16. Personal bars to relief. – Specific performance of a contract cannot be enforced in favour of a
person –
(a)xxx xxx xxx
(b) xxx xxx xxx
   (c) who fails to prove that he has performed or has always been ready and willing to
perform the essential terms of the contract which are to be performed by him, other than
terms the performance of which has been prevented or waived by the defendant.
Explanation.—For the purposes of clause (c),—
          (i)    where a contract involves the payment of money, it is not essential for the plaintiff to
actually tender to the defendant or to deposit in court any money except when so
directed by the court;
          (ii)   the plaintiff must prove performance of, or readiness and willingness to perform, the
contract according to its true construction.
5
7. We   shall   also   have   to   take   into   consideration   that   the
specific performance of contract of an immovable property is a
discretionary relief in terms of Section 203
 of The Specific Relief
Act as it stood at the time of filing of the suit. 
8. Section 20 of The Specific Relief Act lays down that the
jurisdiction   to   decree   a   suit   for   specific   performance   is   a
320. Discretion as to decreeing specific performance.—
(1) The jurisdiction to decree specific performance is discretionary, and the court is not bound
to grant such relief merely because it is lawful to do so; but the discretion of the court is not arbitrary
but sound and reasonable, guided by judicial principles and capable of correction by a court of
appeal.
(2) The following are cases in which the court may properly exercise discretion not to decree
specific performance:—
(a) where the terms of the contract or the conduct of the parties at the time of entering into
the contract or the other circumstances under which the contract was entered into are such
that  the  contract,  though  not voidable, gives the  plaintiff an  unfair  advantage over the
defendant; or
(b) where the performance of the contract would involve some hardship on the defendant
which he did not foresee, whereas its non­performance would involve no such hardship on the
plaintiff; or
(c) where the defendant entered into the contract under circumstances which though not
rendering the contract voidable, makes it inequitable to enforce specific performance.
Explanation 1.—Mere inadequacy of consideration, or the mere fact that the contract is
onerous to the defendant or improvident in its nature, shall not be deemed to constitute an
unfair advantage within the meaning of clause (a) or hardship within the meaning of clause (b).
Explanation 2.— The question whether the performance of a contract would involve hardship
on the defendant within the meaning of clause (b) shall, except in cases where the hardship has
resulted from any act of the plaintiff subsequent to the contract, be determined with reference to
the circumstances existing at the time of the contract.
(3) The court may properly exercise discretion to decree specific performance in any case
where the plaintiff has done substantial acts or suffered losses in consequence of a contract capable
of specific performance.
(4) The court shall not refuse to any party specific performance of a contract merely on the
ground that the contract is not enforceable at the instance of the party.
6
discretionary jurisdiction and the court is not bound to grant
such relief merely because it is lawful.
9. The   first  issue   is   whether   the   promises   were   reciprocal
promises or promises independent of each other.  There can be
no   hard   and   fast   rule   and   the   issue   whether   promises   are
reciprocal or not has to be determined in the peculiar facts of
each case.  As far as the present case is concerned, the vendor,
who was a lady received less than 20% of the sale consideration
but handed over the possession to the defendant, probably with
the hope that the dispute would be decided soon, or at least
within a year.  Therefore, Clause 3 provided that if the case is
not decided within one year, then the second party shall pay to
the first party the customary rent for the land.   It has been
urged by the respondents that the High Court rightly held that
this was not a reciprocal promise and had nothing to do with the
sale of the land.  One cannot lose sight of the fact that the land
had been handed over to Bahadur Singh and he had agreed that
he   would   pay   rent   at   the   customary   rate.     Therefore,   the
possession of the land was given to him only on this clear­cut
7
understanding.   This was, therefore, a reciprocal promise and
was an essential part of the agreement to sell.
10. Admittedly, Bahadur Singh did not even pay a penny as
rent till the date of filing of the suit.  After such objection was
raised in the written statement, in replication filed by him, he
instead of offering to pay the rent, denied his liability to pay the
same.   Even if we were to hold that this promise was not a
reciprocal promise, as far as the agreement to sell is concerned,
it   would   definitely   mean   that   Bahadur   Singh   had   failed   to
perform his part of the contract.   There can be no manner of
doubt that the payment of rent was an essential term of the
contract.  Explanation (ii) to Section 16(c) clearly lays down that
the plaintiff must prove performance or readiness or willingness
to perform the contract according to its true construction.  The
only construction which can be given to the contract in hand is
that Bahadur Singh was required to pay customary rent.
11. It has been urged that no date was fixed for payment of
rent.  Tenancy can be monthly or yearly.  At least after expiry of
one   year,   Bahadur   Singh   should   have   offered   to   pay   the
8
customary rent to the vendor which could have been monthly or
yearly.  But he could definitely not claim that he is not liable to
pay rent for 13 long years.
12.    Learned counsel for the respondents urged that in case of
non­payment of rent the plaintiff was at liberty to file suit for
recovery of rent.  We are not impressed with this argument.  A
party cannot claim that though he may not perform his part of
the contract he is entitled to specific performance of the same.
13. Explanation (ii) to Section 16(c)  of The Specific Relief Act
lays   down   that  it   is   incumbent   on   the   party,   who   wants   to
enforce the specific performance of a contract, to aver and prove
that he has performed or has always been ready and willing to
perform the essential terms of the contract.   This the plaintiff
miserably failed to do in so far as payment of rent is concerned.
14. A perusal of Section 20 of The Specific Relief Act clearly
indicates that the relief of specific performance is discretionary.
Merely because the  plaintiff  is legally right,  the Court is not
bound to grant him the relief.   True it is, that the Court while
9
exercising its discretionary power is bound to exercise the same
on established judicial principles and in a reasonable manner.
Obviously, the discretion cannot be exercised in an arbitrary or
whimsical manner.  Sub clause(c) of sub­section (2) of Section 20
provides that even if the contract is otherwise not voidable but
the   circumstances   make   it   inequitable   to   enforce   specific
performance, the Court can refuse to grant such discretionary
relief.  Explanation (2) to the Section provides that the hardship
has to be considered at the time of the contract, unless the
hardship is brought in by the action of the plaintiff.
15. In this case, Bahadur Singh having got possession of the
land in the year 1964 did not pay the rent for 13 long years and
even when he filed the replication in the year 1978, he denied
any liability to pay the customary rent.  Therefore, in our opinion,
he did not act in a proper manner.  Equity is totally against him.
In   our   considered   view,   he   was   not   entitled   to   claim   the
discretionary   relief   of   specific   performance   of   the   agreement
having not performed his part of the contract even if that part is
held to be a distinct part of the agreement to sell. The vendee
Bahadur Singh by not paying the rent for 13 long years to the
10
vendor Mohinder Kaur, even when he had been put in possession
of the land on payment of less than 18% of the market value,
caused undue hardship to her.  The land was agricultural land.
Bahadur Singh was cultivating the same.   He must have been
earning a fairly large amount from this land which measured
about 9½ acres.  He by not paying the rent did not act fairly and,
in our opinion, forfeited his right to get the discretionary relief of
specific performance.
16.   In view of the above, we allow the appeals, set aside the
judgment and decree of all the courts below and dismiss the suit
for specific performance.  As far as the alternative plea of refund
is   concerned,   we   are   clearly   of   the   view   that   since   the
respondents enjoyed the land for 55 long years without payment
of any rent they are not entitled to any relief.   No order as
to costs.
…………………………J.
(Deepak Gupta)
…………………………J.
(Aniruddha Bose)
New Delhi
September 11, 2019

Undue influence - burden of proof lies on the person who made such allegations = The plaintiffs alleged that the original defendants obtained the sale deed dated 02.03.1970 from their father Vaijai, since deceased, in favour of defendant no.1, fraudulently, by deceit and undue influence because of old age and infirmity of the deceased and who was living with the defendants. The suit was dismissed. The appellate court allowed the appeal holding that the defendants had failed to discharge their burden of being in a position to dominate the will of the deceased by undue influence. The High Court reversed the order of the first appellate court and restored the dismissal of the suit. = Apex court held that The primary question for our consideration is the physical condition of the deceased and his capacity to execute the sale deed. The second question for our consideration is if the original defendants nos.1 and 2 exercised undue influence over the deceased in having the sale deed executed in favour of defendant no.1 because of the physical infirmity of the deceased on account of his old age. = The pleadings in the plaint are completely bereft of any details or circumstances with regard to the nature, manner or kind of undue influence exercised by the original defendants over the deceased. A mere bald statement has been made attributed to the infirmity of the deceased. We have already held that the deceased was not completely physically and mentally incapacitated. There can be no doubt that the original defendants were in a fiduciary relationship with the deceased. Their conduct in looking after the deceased and his wife in old age may have influenced the thinking of the deceased. But that per se cannot lead to the only irresistible conclusion that the original defendants were therefore in a position to dominate the will of the deceased or that the sale deed executed was unconscionable. The onus would shift upon the original defendants under Section 16 of the Contract Act read with Section 111 of the Evidence Act, as held in Anil Rishi vs. Gurbaksh Singh (supra), only after the plaintiff would have established a prima facie case. The wife of the deceased was living with him and had accompanied him to the office of the sub­registrar. The plaintiff has not pleaded or led any evidence that the wife of the deceased was also completely dominated by the original defendants. In every cast, creed, religion and civilized society, looking after the elders of the family is considered a sacred and pious duty. Nonetheless, today it has become a matter of serious concern. The Parliament taking note of the same enacted the Maintenance and Welfare of Parents and Senior Citizens Act, 2007. We are of the considered opinion, in the changing times and social mores, that to straightway infer undue influence merely because a sibling was looking after the family elder, is an extreme proposition which cannot be countenanced in absence of sufficient and adequate evidence. Any other interpretation by inferring a reverse burden of proof straightway, on those who were taking care of the elders, as having exercised undue influence can lead to very undesirable consequences. It may not necessarily lead to neglect, but can certainly create doubts and apprehensions leading to lack of full and proper care under the fear of allegations with regard to exercise of undue influence. Law and life run together. If certain members of the family are looking after the elderly and others by choice or by compulsion of vocation are unable to do so, there is bound to be more affinity between the elder members of the family with those who are looking after them day to day.

Undue influence - burden of proof lies on the person  who made such allegations =
The plaintiffs alleged that the original defendants obtained the sale deed dated 02.03.1970 from
their father Vaijai, since deceased, in favour of defendant no.1, fraudulently, by deceit and undue influence because of old age and infirmity of the deceased and who was living with the defendants. The suit was dismissed.   The appellate court allowed the appeal holding that the defendants had failed to discharge their burden of being in a position to dominate the will of the deceased by undue influence. The High Court reversed the order of the first appellate
court and restored the dismissal of the suit. = Apex court held that 
The primary question for our consideration is the physical condition of the deceased and his capacity to execute the sale deed.   
The second question for our consideration is if the original defendants nos.1 and 2 exercised undue influence over the deceased in having the sale deed executed in favour of defendant no.1 because of the physical infirmity of the deceased on account of his old age. =

The pleadings   in   the   plaint   are   completely bereft of   any   details   or circumstances with regard to the nature, manner or kind of undue influence exercised by the original defendants over the deceased. A mere bald statement has been made attributed to the infirmity of the deceased. We have already held that the deceased was not completely physically and mentally incapacitated.  There can be no doubt that the original defendants were in a fiduciary relationship with the deceased.  Their conduct in looking after the deceased and his   wife   in   old   age   may   have   influenced   the   thinking   of   the deceased.   But   that  per   se  cannot   lead   to   the   only   irresistible
conclusion that the original defendants were therefore in a position to dominate the will of the deceased or that the sale deed executed was   unconscionable.     The   onus   would   shift   upon   the   original defendants under Section 16 of the Contract Act read with Section 111 of the Evidence Act, as held in Anil Rishi vs. Gurbaksh Singh (supra), only after the plaintiff would have established a prima facie case.   The   wife   of   the   deceased   was   living   with   him   and   had accompanied him to the office of the sub­registrar. 
The plaintiff has not pleaded or led any evidence that the wife of the deceased was also completely dominated by the original defendants. In every cast, creed, religion and civilized society, looking after the elders of the family is considered a sacred and pious duty.  Nonetheless, today it has become a matter of serious concern.   The Parliament taking note of the same enacted the Maintenance and Welfare of Parents and Senior Citizens Act, 2007.  We are of the considered opinion, in the   changing   times   and   social   mores,   that   to   straightway   infer undue influence merely because a sibling was looking after the family   elder,   is   an   extreme   proposition   which  cannot   be countenanced in absence of sufficient and adequate evidence.  Any other   interpretation   by   inferring   a   reverse   burden   of   proof straightway, on those who were taking care of the elders, as having exercised   undue   influence   can   lead   to   very   undesirable consequences.   It may not  necessarily lead to  neglect, but can certainly create doubts and apprehensions leading to lack of full and proper care under the fear of allegations with regard to exercise of undue influence.  Law and life run together.  If certain members of the family are looking after the elderly and others by choice or by compulsion of vocation are unable to do so, there is bound to be more affinity between the elder members of the family with those who are looking after them day to day.


REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(s). 2896 OF 2009
RAJA RAM ...APPELLANT(S)
VERSUS
JAI PRAKASH SINGH AND OTHERS      ...RESPONDENT(S)
JUDGMENT
NAVIN SINHA, J.
The appellant is aggrieved by the order allowing the second
appeal preferred by the defendants. The High Court set aside the
order of the First Appellate Court which had allowed the appeal of
the appellant and set aside the order dismissing the appellants suit.
2. The plaintiff and defendant no.2 are brothers. Defendant no.1
was the wife of defendant no.2.  Respondents nos.1 to 3 are sons of
deceased defendant no.1. Original plaintiff no.2, another brother,
has chosen not to pursue the appeal. The plaintiffs alleged that the
original defendants obtained the sale deed dated 02.03.1970 from
1
their father Vaijai, since deceased, in favour of defendant no.1,
fraudulently, by deceit and undue influence because of old age and
infirmity of the deceased and who was living with the defendants.
The suit was dismissed.   The appellate court allowed the appeal
holding that the defendants had failed to discharge their burden of
being in a position to dominate the will of the deceased by undue
influence. The High Court reversed the order of the first appellate
court and restored the dismissal of the suit.
3. Learned counsel for the appellant submitted that the deceased
was old, infirm, bedridden and sick for approximately the last 8 to
10 years. His mental faculties were also impaired. He was therefore
entirely dependent on the original defendants who were therefore in
a   position   to   exercise   undue   influence   over   him.   The   deceased
expired on 21.04.1971 within ten months of the execution of the
sale deed. The witnesses to the sale deed were related to defendant
no.2. It had not been established that full consideration had been
paid. Defendant no.1 had no source of income to pay the purchase
price. The wife of the deceased has not been examined as witness.
The defendants did not lead the evidence of the Sub­Registrar who
2
had registered the sale deed. The deceased had not sold any land to
third persons in the year 1968 as contended by the defendants.
4. Learned   counsel   for   the   respondent/defendants   submitted
that under Section 101 of the Evidence Act, 1872 the initial onus
lay on the plaintiffs by establishing a prima facie case for undue
influence   and   only   then   the   onus   would   shift   to   them.   The
necessary pleadings in respect of the same were completely lacking.
The First Appellate Court wrongly shifted the burden  upon  the
respondents. The deceased may have been old and infirm, but he
was not deprived of his mental faculties so as not to know the
nature of documents executed by him. He was alive approximately
for ten months after the execution of the deed, but never questioned
the same. The deceased had executed another sale deed two years
earlier in 1968, Exhibit 10 in favour of third persons which has not
been questioned by the appellant. It establishes that the deceased
was not in a condition where undue influence could be exercised
over him.  There can be no presumptions merely on account of his
old age.  DW­1 was a witness to the sale deed and was present at
the time of registration. The deceased admitted before the sub3
registrar   having   received   a   sum   of   Rs.2,000/­   earlier   and
Rs.4,000/­ was paid at the time of registration. The Sub­Registrar
has not recorded any adverse inferences about the condition or
capacity of the deceased at the time of registration. A registered
instrument will carry a presumption about its correctness unless
rebutted.
5. Reliance in support of the submissions was placed on  Anil
Rishi vs. Gurbaksh Singh, (2006) 5 SCC 558, Jamila Begum (D)
thr. L.Rs. vs. Shami Mohd. (D) thr. L.Rs. and ors., (2019) 2 SCC
727,  Bishundeo   Narain   and   Ors.   vs.   Seogeni   Rai   and
Jagernath, 1951 SCR 548,  Subhas   Chandra   Das   Mushib   vs.
Ganga   Prosad   Das   Mushib   and   Ors.,   1967   (1)   SCR  331   and
Krishna   Mohan   Kul   alias   Nani   Charan   Kul   and   anr.   vs.
Patima Maity and ors., (2004) 9 SCC 468.
6. We have considered the submissions on behalf of the parties.
The primary question for our consideration is the physical condition
of the deceased and his capacity to execute the sale deed.   The
4
second question for our consideration is if the original defendants
nos.1 and 2 exercised undue influence over the deceased in having
the sale deed executed in favour of defendant no.1 because of the
physical infirmity of the deceased on account of his old age.
7. Section   14   of   the   Indian   Contract   Act,   1872   defines   ‘free
consent’ as follows:
“14. ‘Free consent’ defined – Consent is said to be free
when it is not caused by –
(1) xxxxx
(2) Undue influence, as defined in section 16,…”
Section 16 defines ‘undue influence’ as follows:
“16. ‘Undue influence’ defined—
(1) A   contract   is   said   to   be   induced   by   ‘undue
influence’ where the relations subsisting between
the parties are such that one of the parties is in a
position to dominate the will of the other and uses
that position to obtain an unfair advantage over
the other. 
(2) In   particular   and   without   prejudice   to   the
generality of the foregoing principle, a person is
deemed to be in a position to dominate the will of
another—
(a) where he holds a real or apparent authority over
the   other,   or   where   he   stands   in   a   fiduciary
relation to the other; or
(b) where he makes a contract with a person whose
mental   capacity   is   temporarily   or   permanently
affected   by   reason   of   age,   illness,   or   mental   or
bodily distress.
5
(3) Where a person who is in a position to dominate
the will of another, enters into a contract with him,
and the transaction appears, on the face of it or on
the evidence adduced, to be unconscionable, the
burden   of   proving   that   such   contract   was   not
induced   by   undue   influence   shall   be   upon   the
person in a position to dominate the will of the
other. 
Nothing   in   the   sub­section   shall   affect   the
provisions of section 111 of the Indian Evidence
Act, 1872 (1 of 1872).”
8. Section 111 of the Indian Evidence Act, 1872, explains good
faith in transactions as follows:
“111. Proof of good faith in transactions where one
party is in  relation  of active  confidence.—Where
there   is   a   question   as   to   the   good   faith   of   a
transaction between parties, one of whom stands
to the other in a position of active confidence, the
burden of proving the good faith of the transaction
is   on   the   party   who   is   in   a   position   of   active
confidence.”
9. The deceased undisputedly was over 80 years and above in
age. The plaintiff pleaded that by reason of age and sickness, the
deceased was unable to move and walk, with deteriorated eye sight
due to cataract. The mental capacity of the deceased was impaired.
The Advanced Law Lexicon by P.Ramanatha Aiyar, third edition
reprint,2009 defines impairment in relation to a human being as
6
total or partial loss of a body function, total or partial loss of a part
of the body, malfunction of a part of the body and malfunction or
disfigurement of a part of the body. Except for a bald statement in
the plaint that the deceased was mentally impaired there is no
evidence   whatsoever   of   his   mental   status.   There   can   be   no
presumption with regard to the same only because of old age to
equate   it   with   complete   loss   of   mental   faculties   by   senility   or
dementia. Ageing is a process which affects individuals differently at
distinguishable ages.   The sale deed executed by the deceased in
favour of one Babu Ram and Munshi Lal two years earlier in 1968
has not been assailed by the appellant on the ground that the
deceased was devoid of the power of reasoning, because of mental
impairment. There is no evidence of any such rapid deterioration in
the condition of the deceased in these two years.
10.   The deceased on account of his advanced age may have been
old and infirm with a deteriorating eye sight, and unable to move
freely.   There   is   no   credible   evidence   that   he   was   bed   ridden.
Hardness of hearing by old age cannot be equated with deafness.
The plaintiff, despite being the son of the deceased, except for bald
7
statement in the plaint, has not led any evidence in support of his
averments. It is an undisputed fact that the deceased appeared
before the sub­registrar for registration. It demolishes the entire
case of the plaintiff that the deceased was bed ridden. He had put
his thumb impression in presence of the sub­registrar after the sale
deed had been read over and explained to him. The deceased had
acknowledged receipt of the entire consideration in presence of the
sub­registrar   only   after   which   the   deed   was   executed   and
registered. The wife of the deceased had accompanied him to the
office   of   the   sub­registrar.   The   sale   deed   being   a   registered
instrument,   there   shall   be   a   presumption   in   favour   of   the
defendants. The onus for rebuttal lay on the plaintiff which he failed
to discharge.  Notwithstanding the finding of enmity between PW­2
and PW­3 with original defendant no.2, the First Appellate Court
erred in relying upon these two witnesses by holding that they were
independent witnesses and convincing.  DW­1, though related was
a witness to the sale deed. His evidence in support of the events
before the sub­registrar therefore has to be accepted. The plaintiff
could have led evidence in rebuttal of the sub­registrar but he did
not do so. 
8
11. That   leads   us   to   the   question   of   undue   influence.     The
pleadings   in   the   plaint   are   completely bereft of   any   details   or
circumstances with regard to the nature, manner or kind of undue
influence exercised by the original defendants over the deceased. A
mere bald statement has been made attributed to the infirmity of
the deceased. We have already held that the deceased was not
completely physically and mentally incapacitated.  There can be no
doubt that the original defendants were in a fiduciary relationship
with the deceased.  Their conduct in looking after the deceased and
his   wife   in   old   age   may   have   influenced   the   thinking   of   the
deceased.   But   that  per   se  cannot   lead   to   the   only   irresistible
conclusion that the original defendants were therefore in a position
to dominate the will of the deceased or that the sale deed executed
was   unconscionable.     The   onus   would   shift   upon   the   original
defendants under Section 16 of the Contract Act read with Section
111 of the Evidence Act, as held in Anil Rishi vs. Gurbaksh Singh
(supra), only after the plaintiff would have established a prima facie
case.   The   wife   of   the   deceased   was   living   with   him   and   had
9
accompanied him to the office of the sub­registrar. The plaintiff has
not pleaded or led any evidence that the wife of the deceased was
also completely dominated by the original defendants. In every cast,
creed, religion and civilized society, looking after the elders of the
family is considered a sacred and pious duty.  Nonetheless, today it
has become a matter of serious concern.   The Parliament taking
note of the same enacted the Maintenance and Welfare of Parents
and Senior Citizens Act, 2007.  We are of the considered opinion, in
the   changing   times   and   social   mores,   that   to   straightway   infer
undue influence merely because a sibling was looking after the
family   elder,   is   an   extreme   proposition   which   cannot   be
countenanced in absence of sufficient and adequate evidence.  Any
other   interpretation   by   inferring   a   reverse   burden   of   proof
straightway, on those who were taking care of the elders, as having
exercised   undue   influence   can   lead   to   very   undesirable
consequences.   It may not  necessarily lead to  neglect, but can
certainly create doubts and apprehensions leading to lack of full
and proper care under the fear of allegations with regard to exercise
of undue influence.  Law and life run together.  If certain members
of the family are looking after the elderly and others by choice or by
10
compulsion of vocation are unable to do so, there is bound to be
more affinity between the elder members of the family with those
who are looking after them day to day.
12. In Bishundeo Narain (supra) it was observed as follows:
“We   turn   next   to   the   questions   of   undue
influence and coercion. Now it is to be observed
that these have not been separately pleaded. It is
true they may overlap in part in some cases but
they are separate and separable categories in law
and must be separately pleaded.
It   is   also   to   be   observed   that   no   proper
particulars have been furnished. Now if there is
one   rule   which   is   better   established   than   any
other, it is that in cases of fraud, undue influence
and coercion, the parties pleading it must set forth
full particulars and the case can only be decided
on   the   particulars   as   laid.   There   can   be   no
departure   from   them   in   evidence.   General
allegations are insufficient even to amount to an
averment of fraud of which any court ought to take
notice however strong the language in which they
are   couched   may   be,   and   the   same   applies   to
undue influence and coercion.”
13. In Subhas Chandra (supra), distinguishing between influence
and undue influence, it was observed as follows:
“It must also be noted that merely because the
parties   were   nearly   related   to   each   other   no
presumption of undue influence can arise. As was
11
pointed out by the Judicial Committee of the Privy
Council in Poosathurai v. Kappanna Chettiar and
others 47 I.A. p. 1 :­
"It is a mistake (of which there are a good
many   traces   in   these   proceedings)   to   treat
undue influence as having been established
by   a   proof   of   the   relations   of   the   parties
having   been   such   that   the   one   naturally
relied upon the other for advice, and the other
was in a position to dominate the will of the
first in giving it. Up to that point "influence"
alone has been made out. Such influence may
be used wisely, judiciously and helpfully. But
whether   by   the   law   of   India   or   the   law  of
England, more than mere influence must be
proved   so   as   to   render   influence,   in   the
language of the law, "undue".”
14. In  Subhas   Chandra  (supra),   it   was   further   observed   that
there was no presumption of imposition merely because a donor
was old and weak.   Mere close relation also was insufficient to
presume undue influence, observing as follows:
“Before, however, a court is called upon to examine
whether undue influence was exercised or not, it
must scrutinise the pleadings to find out that such
a case has been made out and that full particulars
of undue influence have been given as in the case
of fraud. See Order 6, Rule 4 of the Code of Civil
Procedure. This aspect of the pleading was also
given   great   stress   in   the   case   of   Ladli   Prasad
Jaiswal [1964] 1 SCR 270 above referred to. In that
case it was observed (at p. 295):
12
"A vague or general plea can never serve this
purpose; the party pleading must therefore be
required to plead the precise nature of the
influence exercised, the manner of use of the
influence, and the unfair advantage obtained
by the other."
15. Krishna  Mohan  (supra)  is distinguishable on its own fact.
The   executant   was   undisputably   over   100   years   of   age.                                                            The witnesses proved that he was paralytic and virtually bedridden.
None of the witnesses could substantiate that the executant had
put his thumb impression.
16. The first appellate court, completely erred in appreciation of
the facts and evidence in the case. There can be no application of
the law sans the facts of a case. The primary ingredients of the law
need   to   be   first   established   by   proper   pleading   supported   by
relevant   evidence.   Cases   cannot   be   decided   on   assumptions   or
presumptions. We do not think that the present calls for exercise of
any discretionary jurisdiction under Article 136 of the Constitution
as   a   fourth   court   of   appeal.   In  Pritam   Singh  (supra)   it   was
observed:
13
“9. …Generally speaking, this Court will not grant
special leave, unless it is shown that exceptional
and special circumstances exist, that substantial
and grave injustice has been done and that the
case   in   question   presents   features   of   sufficient
gravity to warrant a review of the decision appealed
against. Since the present case does not in our
opinion fulfil any of these conditions, we cannot
interfere with the decision of the High Court, and
the appeal must be dismissed.”
17. On a consideration of the entirety of the matter we find no
reason to interfere with the concurrent findings arrived at by two
courts. The appeal is dismissed.   There shall be no order as to
costs.
…………...................J.
[NAVIN SINHA]
…………...................J.
[INDIRA BANERJEE]
NEW DELHI
SEPTEMBER 11, 2019.
14

When bail be granted in commission of fraud punishable under Section 447 of the Companies Act, 2013 = from FY 2009­10 to FY 2016­17, Brij Bhushan Singal and Neeraj Singal, promoters of Bhushan Steel Ltd. (for short “BSL”), assisted by employees and close associates, used a complex web of 157 companies to siphon off funds from BSL for various purposes, and also fraudulently availed of credit from various lender banks and manipulated the books of accounts and financial statements of BSL, causing wrongful loss to banks and financial institutions amounting to Rs. 20,879 crores and causing wrongful gain to the promoters and their family members, amounting to around Rs. 3500 crores. Respondent No. 1 herein, Nittin Johari, who was the Chief Financial Officer and Whole Time Director (Finance) of BSL, as well as a member of the Committee of the Board of Directors on Borrowing, Investment and Loans during the relevant period, was alleged to have been a close associate of the promoters and to have played a central role in perpetrating these frauds. = in Y.S. Jagan Mohan Reddy (supra): “34. Economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offences having deeprooted conspiracies and involving huge loss of public funds need to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country. 35. While granting bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interests of the public/State and other similar considerations.”=. In our considered opinion, the High Court in the impugned order has failed to apply even these general principles. The High Court, after referring to certain portions of the complaint to ascertain the alleged role of Respondent No. 1, came to the conclusion that the role attributed to him was merely that of colluding with the co­accused promoters in the commission of the offence in question. The Court referred to the principles governing the grant of bail as laid down by this Court in Ranjitsing Brahmajeetsingh Sharma v. State of Maharashtra, (2005) 5 SCC 294, which discusses the effect of the twin mandatory conditions pertaining to the grant of bail for offences under the Maharashtra Control of Organised Crime Act, 1999 as laid down in Section 21(4) thereof, similar to the conditions embodied in Section 212(6)(ii) of the Companies Act. However, the High Court went on to grant bail to Respondent No.1 by observing that bail was justified on the “broad probabilities” of the case. In our considered opinion, this vague observation demonstrates non­application of mind on the part of the Court even under Section 439 of the Cr.P.C., even if we keep aside the question of satisfaction of the mandatory requirements under Section 212(6)(ii) of the Companies Act. We refrain from making any observations with respect to the proceedings pertaining to Neeraj Singal, particularly since the proceedings pertaining to the vires of Section 212(6)(ii) of the Companies Act that have arisen therefrom are pending before this Court, as already noted supra. However, we find it necessary to note that in light of the peculiar circumstances of the case, the High Court ought not to have been influenced by the non­arrest of Brij Bhushan Singal and the grant of bail to Neeraj Singal. 15. In light of the foregoing discussion, we are of the view that the High Court has failed to apply its mind to all the circumstances that were required to be considered while granting bail, particularly in relation to economic offences. Accordingly, the impugned order is hereby set aside. In the interest of justice, we deem it fit to remand the matter to the High Court to reconsider Bail Application No. 1971/2019 filed by Respondent No.1 in light of the principles governing the grant of bail under Section 439 of the Cr.P.C, while also keeping in mind the scope and effect of the twin mandatory conditions for grant of bail laid down in Section 212(6)(ii) of the Companies Act.

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 1381 OF 2019

(@ S.L.P. (CRL.) NO. 7437 OF 2019

Serious Fraud Investigation Office  …Appellant(s)

Versus

Nittin Johari & Anr. …Respondent(s)

J U D G M E N T

MOHAN M. SHANTANAGOUDAR, J.

Leave granted. 

2.  The   instant   appeal   challenges   the   grant   of   bail   to

Respondent No. 1 by the High Court of Delhi in Bail Application

No.   1971/2019   in   C.C.   No.   770/2019,   vide   the   order   dated

14.08.2019. 

3. The   case   of   the   prosecution   primarily   hinges   on   the

commission   of   fraud   punishable   under   Section   447   of   the

Companies Act, 2013 (for short “the Companies Act”), though

several other offences under the Companies Act and the Indian

NON­REPORTABLE

1

Penal Code, 1860 have also been alleged. Briefly put, it is alleged

that from FY 2009­10 to FY 2016­17, Brij Bhushan Singal and

Neeraj Singal, promoters of Bhushan Steel Ltd. (for short “BSL”),

assisted by employees and close associates, used a complex web

of   157   companies   to   siphon   off   funds   from   BSL   for   various

purposes, and also fraudulently availed of credit from various

lender   banks   and   manipulated   the   books   of   accounts   and

financial statements of BSL, causing wrongful loss to banks and

financial   institutions   amounting   to   Rs.   20,879   crores   and

causing   wrongful   gain   to   the   promoters   and   their   family

members, amounting to around Rs. 3500 crores. 

Respondent No. 1 herein, Nittin Johari, who was the Chief

Financial Officer and Whole Time Director (Finance) of BSL, as

well as a member of the Committee of the Board of Directors on

Borrowing, Investment and Loans during the relevant period, was

alleged to have been a close associate of the promoters and to

have   played   a   central   role   in   perpetrating   these   frauds.   In

particular, it is alleged that Respondent No. 1 played an active

role in using fraudulent letters of credit to avail of credit from

lender   banks,   in   inflating   Stock­in­Transit   figures   to   avail   of

greater   Drawing   Power   from   banks,   and   in   manipulating

2

statements of accounts and other financial statements of BSL in

the garb of adopting the Indian Accounting Standards. 

Investigation into the affairs of BSL and certain associated

companies had been initiated by the Serious Fraud Investigation

Office (for short “the SFIO”), the Appellant herein, pursuant to

the order dated 03.05.2016 issued by the Ministry of Corporate

Affairs   (for   short   “the   MCA”)   under   Section   212(1)(c)   of   the

Companies Act. Gradually, the scope of investigation expanded to

157 companies and 130 individuals.

4.  Respondent No. 1 came to be arrested on 02.05.2019, and

was remanded to the Appellant’s custody on 03.05.2019. He has

been in judicial custody since 08.05.2019. It is also pertinent to

note that previously, co­accused Neeraj Singal had been granted

certain interim reliefs (including interim bail) by the High Court

of   Delhi   vide   order   dated   29.08.2018   in   W.P.   (Crl.)   No.

2453/2018, in which he had challenged the constitutionality of

Section 212(6)(ii), (7) and (8) of the Companies Act. The operation

and effect of this order (save for his interim release) had been

stayed by this Court in appeal, vide order dated 04.09.2018.

5. Respondent No. 1 applied for regular bail under Section 439

of the Code of Criminal Procedure, 1973 (for short “the Cr.P.C.”),

3

which   was   dismissed   by   the   Special   Judge   (Companies   Act),

Dwarka District Courts, Delhi, vide order dated 06.06.2019. The

Investigation Report was submitted by the Appellant to the MCA

on 27.06.2019, and after obtaining sanction from the MCA, the

Petitioner   filed   the   Complaint   before   the   Special   Court   on

01.07.2019.   It   may   be   pertinent   to   note   that   as   per   Section

212(15)   of   the   Companies   Act,   the   Investigation   Report   filed

under Section 212(12) of the Companies Act is deemed to be a

report filed by a police officer under Section 173 of the Cr.P.C.

(i.e. the chargesheet). 

Respondent No. 1 filed another application under Section

439 of the Cr.P.C. before the Special Judge, which was dismissed

vide order dated 02.08.2019. It is pertinent to note that both

these orders take note of the mandatory nature of Section 212(6)

(ii)   of   the   Companies   Act  pertaining   to   the   grant   of   bail   for

offences,   as   well   as   of   the   gravity   of   the   economic   offence

committed, the deep­rooted nature of the conspiracy, and the

huge loss of public funds involved.

6.  Bail   Application   No.   1791/2019   was   subsequently   filed

before the High Court of Delhi, which came to be allowed vide the

impugned order, giving rise to the instant appeal. The impugned

4

order was stayed by this Court on 16.08.2019. Respondent No. 1

therefore continues to be in custody.

7.  At the outset, learned Solicitor General Shri Tushar Mehta,

appearing   on   behalf   of   the   Appellant,   requested   that   as   the

proceedings in SFIO  v.  Neeraj Singal (Crl. Appeal No. 1114 of

2018) might be referred to by Respondent No. 1 to buttress his

claim for bail on the ground of parity, it may be appropriate for

this bench to also take up the proceedings related to the grant of

interim   bail   to   Neeraj   Singal,   currently   pending   before   a

coordinate bench of this Court, alongside the present petition. As

of now, we do not find any ground to accept this request, and are

therefore constrained to turn it down for the present. 

Learned Solicitor General also submitted that the relief of

interim   bail   had   been   wrongly   granted   to   co­accused   Neeraj

Singal by the High Court of Delhi when he mounted a challenge

to the constitutionality of Section 212(6)(ii), (7) and (8) of the

Companies Act, and not on merits. This order had thereafter

been criticized by this Court in Criminal Appeal No. 1114 of 2018

in its order dated 04.09.2018, inter alia on the ground that the

High Court should have at least considered the case for interim

relief by applying the broad contours of Section 439 of the Cr.P.C.

5

In this respect, he referred to the following observations made in

the order dated 04.09.2018:

“9. In the nature of the interim order that we propose

to pass, we refrain from elaborating on the contentions

and the reasons recorded by the High Court at this

stage. However, we may observe that prima facie we

find   that   the   reasons   being   on the   constitutional

validity of provisions apart from Sections 212(6)(ii) and

212(7) of the Act ought not to have weighed with the

High   Court   for  grant   of   interim   relief.  Moreover,   in

any case, the High Court ought to have applied the

broad contours required to be kept in mind for grant of

bail under Section 439 Cr.P.C., which aspect, we find,

has not been adverted to at all in the impugned order.

There is prima facie substance in the grievance of the

appellants that the High Court has failed to consider

matter   such   as   the   nature   of   gravity   of   the

alleged offence. Moreover, we find that in the course of

the impugned order, the High Court even proceeded to

recall certain observations made by it in another case

(Poonam Malik v. Union of India [W.P.(Crl.) No.2384

of 2018] order dated 10th August 2018).”

It   was   submitted   that   in   light   of   these   peculiar

circumstances, there exists no reason to grant bail to Respondent

No. 1 on the ground of parity with Neeraj Singal. It was further

submitted that the non­arrest of various other co­accused was

not pertinent to deciding whether Respondent No. 1 should be

released on bail.

Learned Solicitor General also sought to impress upon us

the magnitude of the offence, arguing that economic offences

6

form a class apart, particularly cases such as the instant one,

which have resulted in not only a substantial loss to banks but

also a huge blow to the national economy. In such cases, the

Court   must   account   for   several   factors   while   granting   bail,

especially the gravity of the offence involved. In pursuance of this

contention,   he   referred   to   certain   observations   made   by   this

Court   in  Y.S.   Jagan   Mohan   Reddy   v. Central   Bureau   of

Investigation, (2013) 7 SCC 439 to this effect. It was argued that

the above factors had not been considered adequately by the

High Court in the impugned order, which granted bail merely on

the basis of “broad probabilities” and without adverting to the

gravity of the offence and its impact on society.

In this  respect, he took us through the  contents of  the

complaint, arguing that the High Court had erred in selectively

referring to certain portions thereof, and had not appreciated that

the extent of the role of Respondent No. 1 in the alleged offences

had been made out extensively throughout the complaint.

Additionally,   reference   was   made   to   the   mandatory

conditions under Section 212(6)(ii) of the Companies Act, which

require   the   Court   to   record   its   satisfaction   that   there   exist

reasonable grounds for believing that the accused is not guilty of

7

the alleged offence and is not likely to commit any offence while

on bail. It was argued that these conditions do not imply that an

applicant would be kept in custody indefinitely. In this respect,

our   attention   was   drawn   to   the   decision   in  Collector   of

Customs,   New   Delhi   v.   Ahmadalieva   Nodira, (2004) 3 SCC

549, pertaining to an analogous provision (i.e. Section 37(1)(b)(ii)

of the Narcotic Drugs and Psychotropic Substances Act, 1985), in

which it was held that the term “reasonable grounds” refers to

something   more   than   prima   facie   grounds,   and   contemplates

substantial probable causes for believing that the accused is not

guilty of the offence concerned. 

Learned   Solicitor   General   also   referred   to  Nikesh

Tarachand Shah  v. Union of India, (2018) 11 SCC 1, wherein

this   Court   had   struck   down   Section   45   of   the   Prevention   of

Money   Laundering   Act,   2002   (for   short   “the   PMLA”),   another

provision analogous to Section 212(6) of the Companies Act. It

was contended that this decision was irrelevant to the present

case, since the classification because of which the provision was

held to be unconstitutional had been done away with. This was

because when the said judgment was passed, Section 45 of the

8

PMLA imposed the twin conditions for bail only for offences found

in Schedule A of the PMLA (i.e., ‘predicate offences’ found in other

penal statutes) which were punishable with imprisonment for

three   years   or   more,   and   this   Court   had   struck   down   this

provision   as   unconstitutional   mainly   on   the   ground   that   the

aforesaid classification did not seem to have a rational nexus to

the   object   of   that   legislation.   However,   the   Parliament   had

subsequently amended Section 45 of the PMLA, imposing the

twin conditions for bail for offences under the PMLA itself, and

not for offences found in Schedule A. It was further submitted

that after the said amendment, Section 45 of the PMLA had

become in pari materia with Section 212(6) of the Companies Act,

as the latter section also imposed the twin conditions for offences

under Section 447 of the Companies Act itself. 

8.  On the other hand, learned Senior Counsel Shri Kapil Sibal,

appearing on behalf of Respondent No. 1, submitted that once

investigation is over and a chargesheet has been filed, as has

been done in the present case, the nature of allegations may not

be a factor to decide if bail is to be granted. Instead, in such

cases, the Court must consider whether the applicant has been

cooperating   in   the   investigation,   and   whether   there   is   a

9

possibility   that   the   applicant   may   abscond   or   tamper   with

evidence. At the same time, learned Senior Counsel was quick to

caution that mere apprehension of tampering or absconding is

not enough to deny bail, and that there should be an attempt at

tampering with evidence or certainty that the petitioner would

abscond if he is granted bail. Reliance was placed on  State of

Maharashtra  v.  Nainmal Punjaji Shah, (1969) 3 SCC 904 to

buttress this proposition. It was stressed that in the instant case,

there   had   been   no   allegation   of   tampering   with   evidence   or

influencing witnesses against Respondent No. 1.

Learned Senior Counsel also referred to Y.S. Jagan Mohan

Reddy  (supra), where the Court had given the accused therein

liberty to renew his prayer for bail once the chargesheet had been

filed. He also highlighted that bail had been granted within five

days after the chargesheet had been filed. The decision of this

Court in Sanjay Chandra v. Central Bureau of Investigation,

(2012) 1 SCC 40, was also referred to, wherein bail had been

granted   since   custody   was   felt   to   be   unnecessary   after   the

chargesheet had been filed.

10

It was also contended that since BSL has been taken over

by the Tata Group, there was no possibility of tampering with any

evidence, as all relevant documents were either in the possession

of the new owners of BSL or of the Court.

Learned   Senior   Counsel   further   submitted   that   the

Appellant had unfairly targeted Respondent No. 1 by arresting

only him, although 287 parties, including 157 companies and

130 individuals, were named in the complaint. Further, he drew

our   attention   to   the   order   dated   16.08.2019   vide   which   the

Special   Judge   has   directed   the   parties   to   be   summoned   in

batches until December 2019. It was further contended that the

documents sought to be submitted by the Appellant ran into

more than 70,000 pages, the perusal of which at the stage of

framing   of   charges   before   the   Special   Judge   would   take   a

considerable   amount   of   time.   It   was   thus   argued   that   if   the

present appeal before this Court were allowed, Respondent No.1,

who has already spent 124 days in custody, would have to spend

well   over   a   year   or   more   in   custody   even   before   the

commencement of the trial.

With   respect   to   the   twin   mandatory   conditions   under

Section 212(6)(ii) of the Companies Act, learned Senior Counsel

11

highlighted that in Nikesh Tarachand Shah (supra), Section 45

of   the   PMLA   had   been   held   unconstitutional   not   only   under

Article 14, but also under Article 21 of the Constitution, as the

said section made drastic inroads into the fundamental right of

liberty without there being a compelling state interest. However,

without going into the question of the constitutionality of Section

212(6) of the Companies Act itself, it was stressed that since the

provision, as it exists, requires the Court to practically record a

finding   of   acquittal   in   order   to   grant   bail,   it   is   well   nigh

impossible for an applicant to obtain bail under the provision. 

Overall, it was contended that the High Court had used its

discretion in granting bail in Respondent No.1 after applying its

mind   to   the   contents   of   the   complaint   and   relevant   legal

propositions, and did not suffer from any perversity so as to

warrant the intervention of this Court.

9.  Having heard the learned Counsel on either side, we have

perused the record.

10.  It is pertinent to begin our discussion by referring to the

mandatory conditions imposed under Section 212(6)(ii) for the

grant of bail in connection with offences under Section 447 of the

Companies Act. Sub­clause (ii) of Section 212(6) reads as follows:

12

“(6) Notwithstanding anything contained in the Code of

Criminal Procedure, 1973 (2 of 1974), offence covered

under section 447 of this Act shall be cognizable and

no person accused of any offence under those sections

shall be released on bail or on his own bond unless—

(ii)   where   the   Public   Prosecutor   opposes   the

application,   the   court   is   satisfied   that   there   are

reasonable grounds for believing that he is not guilty of

such offence and that he is not likely to commit any

offence while on bail”

Although arguments have been advanced touching upon the

scope   and   validity   of   the   above   provision,   particularly   in   the

aftermath of the decision of this Court in  Nikesh  Tarachand

Shah (supra) pertaining to a similar provision in the PMLA, we

do not find it appropriate to make any observations in this regard

in light of the pendency of the challenge to the constitutionality of

the said provision of the Companies Act before this Court. 

11.  At this juncture, it must be noted that even as per Section

212(7) of the Companies Act, the limitation under Section 212(6)

with   respect   to   grant   of   bail   is   in   addition   to   those   already

provided in the Cr.P.C. Thus, it is necessary to advert to the

principles governing the grant of bail  under Section 439 of the

Cr.P.C.   Specifically,  heed  must   be   paid   to   the  stringent   view

taken   by   this   Court   towards   grant   of   bail   with   respect   of

economic offences. In this regard, it is pertinent to refer to the

13

following observations of this Court in Y.S. Jagan Mohan Reddy

(supra):

“34. Economic offences constitute a class apart and

need to be visited with a different approach in the

matter   of   bail.   The   economic   offences   having   deeprooted conspiracies and involving huge loss of public

funds need to be viewed seriously and considered as

grave offences affecting the economy of the country as

a   whole   and   thereby   posing   serious   threat   to   the

financial health of the country.

35. While granting bail, the court has to keep in mind

the nature of accusations, the nature of evidence in

support thereof, the severity of the punishment which

conviction  will  entail, the character of  the accused,

circumstances   which   are   peculiar   to   the   accused,

reasonable possibility of securing the presence of the

accused at the trial, reasonable apprehension of the

witnesses being tampered with, the larger interests of

the public/State and other similar considerations.”

This Court has adopted this position in several decisions,

including  Gautam   Kundu v. Directorate   of   Enforcement

(Prevention of Money Laundering Act), Government of India,

(2015) 16 SCC 1, and State of Bihar v. Amit Kumar, (2017) 13

SCC 751. Thus, it is evident that the above factors must be taken

into account while determining whether bail should be granted in

cases involving grave economic offences.

12.  As already discussed supra, it is apparent that the Special

Court, while considering the bail applications filed by Respondent

14

No. 1 both prior and subsequent to the filing of the Investigation

Report and complaint, has attempted to account not only for the

conditions laid down in Section 212(6) of the Companies Act, but

also of the general principles governing the grant of bail. 

13. In our considered opinion, the High Court in the impugned

order has failed to apply even these general principles. The High

Court,   after   referring   to   certain   portions   of   the   complaint   to

ascertain   the   alleged   role   of   Respondent   No.   1,   came   to   the

conclusion that the role attributed to him was merely that of

colluding with the co­accused promoters in the commission of

the   offence   in   question.   The   Court   referred   to   the   principles

governing   the   grant   of   bail   as   laid   down   by   this   Court   in

Ranjitsing   Brahmajeetsingh   Sharma  v.  State   of

Maharashtra, (2005) 5 SCC 294, which discusses the effect of

the twin mandatory conditions pertaining to the grant of bail for

offences under the Maharashtra Control of Organised Crime Act,

1999   as   laid   down   in   Section   21(4)   thereof,   similar   to   the

conditions embodied in Section 212(6)(ii) of the Companies Act.

However, the High Court went on to grant bail to Respondent No.

15

1 by observing that bail was justified on the “broad probabilities”

of the case. 

In   our   considered   opinion,   this   vague   observation

demonstrates non­application of mind on the part of the Court

even under Section 439 of the Cr.P.C., even if we keep aside the

question of satisfaction of the mandatory requirements under

Section 212(6)(ii) of the Companies Act. 

14.  Moreover, the fate of the co­accused promoters alleged to be

the “mind and will” of the accused companies seems to have

played heavily on the Court’s mind. The High Court observed that

while co­accused Brij Bhushan Singal had not been arrested due

to his old age, co­accused Neeraj Singal had already been granted

bail, vide order dated 29.08.2018. The Court noted that the order

dated 29.08.2018 primarily dealt with the challenge mounted to

the constitutional validity of various sub­sections of Section 212

of the Companies Act, and that though the operation of that

order had been stayed by the Supreme Court, this was only

because the observations made by the High Court in its order

dated 29.08.2018 were of far­reaching consequences, and the

release of such co­accused on bail had not been reversed. 

16

We refrain from making any observations with respect to the

proceedings pertaining to Neeraj Singal, particularly since the

proceedings pertaining to the vires of Section 212(6)(ii) of the

Companies Act that have arisen therefrom are pending before

this Court, as already noted supra. However, we find it necessary

to note that in light of the peculiar circumstances of the case, the

High Court ought not to have been influenced by the non­arrest

of Brij Bhushan Singal and the grant of bail to Neeraj Singal. 

15.  In light of the foregoing discussion, we are of the view that

the   High   Court   has   failed   to   apply   its   mind   to   all   the

circumstances that were required to be considered while granting

bail, particularly in relation to economic offences. Accordingly,

the impugned order is hereby set aside. 

16.  In the interest of justice, we deem it fit to remand the matter

to the High Court to reconsider Bail Application No. 1971/2019

filed by Respondent No.1 in light of the principles governing the

grant of bail under Section 439 of the Cr.P.C, while also keeping

in mind the scope and effect of the twin mandatory conditions for

grant of bail laid down in Section 212(6)(ii) of the Companies Act.

Needless to say, Respondent No. 1 shall continue to remain in

17

custody subject to the order of the High Court in the said bail

application.

17.  The impugned order of the High Court is set aside. This

appeal is disposed of accordingly, with a request to the High

Court to decide the bail application afresh at an early date, in

accordance   with   law,   and   in   the   light   of   the   aforesaid

observations.

..........................................J.

(N.V. Ramana)

...........................................J.

(Mohan M. Shantanagoudar)

............................................J.

(Ajay Rastogi)

New Delhi;

September 12, 2019.

18

Whether, appeal of tenant was maintainable, while the mortgagee (defendant no.3) had accepted the decree of the trial court by which the trial court recorded the finding that redemption of mortgage has also taken place?” = It specifically held that the plaintiff had become the full owner of the whole property which stood redeemed and defendant no.3 Mustaffa Shah Khan had no share in the property. This finding should have been challenged by defendant no.3. This finding cannot be challenged by the tenants.=The tenants remain tenants whoever be the landlord/owner. Once defendant no.3 Mustaffa Shah Khan had not challenged the decree of the trial court with regard to his title, defendant nos. 1 and 2 cannot be allowed to challenge the finding of ownership with which they are not directly concerned. Therefore, the appeal filed by them before the District Judge on the issue as to whether the plaintiffs had become the full owner of the property or not, was not maintainable.

1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4610 OF 2014
MOHAN CHANDRA TAMTA (DEAD)
THR. LRS.                                                       …  APPELLANT(S)
VERSUS
ALI AHMAD (D) THR LRS & ORS.                   …RESPONDENT(S)
J U D G M E N T
Deepak Gupta, J.
This case has a long and chequered history.  The litigation
initially started almost 59 years back.  The suit property was a
three storeyed structure in the town of Almora in Uttarakhand.
The first records of this house are from the year 1872 when this
property is recorded in the ownership of three brothers namely
Pir Bux, Kalia and Subrati.  Each brother had 1/3rd share in the
property.   Pir Bux mortgaged his 1/3rd  share in favour of one
Ahmadulla   Khan   for   Rs.50/­   in   the   year   1872.     One   of   the
2
brothers, Subrati died issue­less and his share of the property
devolved upon his two brothers Pir Bux and Kalia, who got an
additional 1/6th  share each making them owners of half share
each in the property.   On the death of Kalia, his share was
succeeded by his son Ilahi Bux, and on the death of Ilahi Bux his
widow Smt. Hafizan succeeded to his share of the property.  She
sold her entire share of the property i.e., 50% to one Lalta Prasad
Tamta, predecessor in interest of the present appellant.
2. Half of Subrati’s property i.e. 1/6th  of the total which had
fallen to the share of Pir Bux from Subrati was inherited by his
son Gulam Farid who in turn sold this property to Lalta Prasad
Tamta by way of a sale deed on 28.07.1944.  Thus, Lalta Prasad
Tamta   became   the   owner   of   2/3rd  of   the   structure.     The
remaining 1/3rd continued to be under mortgage.   According to
the plaintiff, Gulam Farid redeemed the property from Ahmadulla
Khan   and   sold   the   1/3rd  share   to   Lalta   Prasad   Tamta   on
17.03.1954.  Therefore, Lalta Prasad became the full owner of the
property.
3
3. It is the case of the plaintiff that defendant no.1 Khalil
Ahmed and defendant no.2 Ali Ahmad were permitted to stay in
some portion of this house by Lalta Prasad Tamta.  Over a period
of time the building started subsiding and the ground floor got
embedded in the earth and only two storeys were left.  In 1960,
Lalta Prasad Tamta issued notice to the said two defendants to
vacate the house but they refused to do so.  He then filed Suit
No.115 of 1960 for their eviction.   The defendant nos. 1 and 2
denied the title of Lalta Prasad Tamta over the property and
claimed that they were the tenants of defendant no.3 Mustaffa
Shah Khan, who was not a party in this suit.   The said suit
instituted by Lalta Prasad Tamta was dismissed. Civil Appeal No.
58 of 1961 filed before the District Judge, Nainital, was also
dismissed.
4. According to the plaintiff, encouraged by the dismissal of
this suit, the defendants got further emboldened and trespassed
over other rooms in the house.  It was urged that defendant no. 3
Mustaffa Shah Khan had no right in the property suit. 
4
5. Another relevant fact is that according to the plaintiff after
the death of Ahmadulla Khan he was succeeded by three sons.
One of his sons Mahmood Shah Khan had 1/3rd share of 1/3rd
,
i.e.   1/9th  share   in   the   property.     Mahmood   Shah   Khan
transferred his rights of mortgagee to one Sadiq Hussain and
Vilayat Hussain.   In 1958, Lalta Prasad Tamta instituted a Civil
Suit No.216 of 1958 against Sadiq Hussain and Vilayat Hussain.
A   compromise   was   arrived   at   between   the   parties   and   Sadiq
Hussain   and   Vilayat   Hussain   abandoned   their   rights   in   the
property.   Thus, Lalta Prasad Tamta became the owner of this
1/9th  share   too.   There   is   obviously   some   confusion   because
according to Lalta Prasad Tamta he had already redeemed the
entire 1/3rd  share of Ahmadulla Khan w.e.f. 17.03.1954.   His
explanation is that to avoid any cloud to his title he settled the
matter.
6. Lalta Prasad Tamta in turn sold the property to Mohan
Chandra   Tamta,   appellant   herein,   on   27.08.1966.     Mohan
Chandra Tamta filed a suit for recovery of possession of the top
floor of the house (3rd floor) and in the alternative also prayed for
5
redemption   of   any   un­redeemed   portion   of   the   mortgaged
property   and   expressed   his   willingness   to   pay   the   balance
mortgaged amount.   The defendant nos. 1 and 2 contested the
suit   and   denied   the   ownership   of   the   plaintiff   on   the   suit
property.   They again claimed that the property was owned by
defendant no.3 Mustaffa Shah Khan who had been impleaded as
party   in   this   suit.     Defendant   no.3   supported   the   stand   of
defendant   nos.   1   and   2.     It   was   pleaded   that   the   suit   for
redemption is barred by time.
7. The Trial court held that Lalta Prasad Tamta had acquired
full ownership of the property and he had transferred the same to
Mohan Chandra Tamta.   A finding was given that the entire
property transferred to Ahmadulla Khan was redeemed by Lalta
Prasad Tamta.  The suit was accordingly decreed on 23.03.1975.
8. Defendant no.2, i.e. the tenant, filed an appeal being Civil
Appeal No.10 of 1975 but no appeal was filed by defendant no.3
Mustaffa Shah Khan against the decree passed by the trial court.
The first appellate court allowed the appeal and dismissed the
6
plaintiff’s suit holding that plaintiff is the owner of the property
only to the extent of 3/4th share and since defendant nos. 1 and 2
are the tenants of defendant no.3 they are not liable to be evicted.
9. The present appellant filed a second appeal in the Allahabad
High Court.   The High Court in the first round set aside the
judgment of the first appellate court, allowed the appeal and
decreed the suit for possession.  An appeal was filed by one Smt.
Murtaza Jahan in this Court on the ground that she was also one
of the legal heirs and no notice had been served upon her.  This
Court   allowed   the   appeal   only   on   that   short   ground   and
remanded the case to the High Court. 
10. After remand, the High Court framed three questions of law
but we are only concerned with the substantial question at serial
no.3 which reads as under:­
“   xxx                        xxx                    xxx
    xxx                        xxx                    xxx
3. Whether,   appeal   of   tenant   was   maintainable,   while   the
mortgagee (defendant no.3) had accepted the decree of the trial
court   by   which   the   trial   court   recorded   the   finding   that
redemption of mortgage has also taken place?”
7
The High Court held that even in the absence of defendant no.3
the appeal was maintainable.
11. We have heard learned counsel for the appellants.   In our
view, the High Court gravely erred in holding that defendant nos.
1 and 2 could maintain an appeal challenging the finding of the
trial court that defendant no.3 was not the owner of the property
when defendant no.3 himself had not challenged this.
12. An important aspect of the matter is that defendant nos. 1
and 2 only claimed to be the tenants in the property.  They did
not claim any ownership rights. It is true that according to them,
it   was   defendant   no.3   Mustaffa   Shah   Khan   who   was   the
mortgagee of the property but the trial court in the presence of
the owner after contest decreed the suit in favour of the plaintiff
and against the defendants.  It specifically held that the plaintiff
had become the full owner of the whole property which stood
redeemed and defendant no.3 Mustaffa Shah Khan had no share
in the property.   This finding should have been challenged by
8
defendant   no.3.     This   finding   cannot   be   challenged   by   the
tenants.
13. The tenants remain tenants whoever be the landlord/owner.
Once defendant no.3 Mustaffa Shah Khan had not challenged the
decree of the trial court with regard to his title, defendant nos. 1
and 2 cannot be allowed to challenge the finding of ownership
with which they are not directly concerned.  Therefore, the appeal
filed by them before the District Judge on the issue as to whether
the plaintiffs had become the full owner of the property or not,
was not maintainable.  They could have challenged the decree on
other grounds but not on this ground. 
14. In view of the above discussion, we set aside the judgment
dated 31.03.2009 of the High Court of Uttarakhand, at Nainital in
Second Appeal No.670 of 2001 and restore the judgment and
decree dated 23.03.1975 of the trial court decreeing the suit in
favour   of   the   appellants.   The   appeal   stands   disposed   of
9
accordingly.     Pending   applications,   if   any,   shall   also   stand
disposed of.  No order as to costs.
…………………………….J.
(Deepak Gupta)
…………………………….J.
(Aniruddha Bose)
New Delhi
September 12, 2019