REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.6280-6281 OF 2008 ARISING OUT OF

SPECIAL LEAVE PETITION (CIVIL) NO.10554-55 OF 2003 M/S HANU MOTEL PVT.LTD. & ANR. … APPELLANTS

VERSUS

UTTAR PRADESH FINANCIAL  CORPORATION LTD. & ANR.    … RESPONDENTS

WITH CIVIL APPEAL NO.   6282  OF 2008

ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO.5593 OF 2007 M/S HANU MOTEL PVT.LTD. … APPELLANTS

VERSUS

UTTAR PRADESH FINANCIAL  CORPORATION LTD. & ANR.    … RESPONDENTS

J U D G M E N T C.K. THAKKER, J. CIVIL APPEAL NOS.6280-6281 OF 2008 @ SPECIAL LEAVE PETITION (CIVIL) NO.10554-55 OF 2003

1. Leave granted.

2. Both  these  appeals  have  been

instituted by the appellants who are aggrieved

and dissatisfied with the order passed by the

High Court of Uttranchal at Nainital dated May

06, 2003 in Appeal against Order No. 120 of

2002 and an order dated May 28, 2003 in Civil

Review Application No. 2796 of 2003 in Appeal

against Order NO. 120 of 2002.

3. Facts in brief of the case are that

appellant No. 1 M/s Hanu Motel Pvt. Ltd. is a

company  registered  under  the  Companies  Act,

1956 (‘Company’ for short) and is engaged in

the  business  of  hotel  and  hospitality  and

having its Head Office at Lucknow. Appellant

No.  2  Avdesh  Kumar  is  a  Director  of  the

appellant  No.  1-Company.   Respondent  No.  1,

Uttar  Pradesh  Financial  Corporation

(‘Corporation’  for  short)  is  a  Corporation

constituted  under  the  State  Financial

Corporations Act, 1956. Respondent No. 2, Ram

Raj  Singh  has  been  joined  as  contesting

respondent who was the Director of appellant

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No.1–Company,  but  who  had  resigned  from  the

said position subsequently.

4. From the record it appears that there

was  an  agreement  between  appellant  No.1–

Company and respondent No. 1–Corporation dated

May 10, 1991 whereunder loan was given by the

Corporation to the Company for the purpose of

its  business.  It  was  the  case  of  the

Corporation that though substantial amount was

paid by the Corporation, the Company did not

abide  by  the  terms  and  conditions  and  the

Corporation was constrained to cancel agreement

on  October  31,  1991.   The  Corporation  also

issued demand notice on August 29, 2000.  Under

the  said  notice,  a  demand  was  made  by  the

Corporation from the appellant No. 1–Company to

pay an amount of Rs.185.20 lakhs. The appellant

No.1–Company,  therefore,  filed  a  suit  being

Civil Suit No. 111 of 2001 in the Court of

Civil  Judge  (Senior  Division),  Haridwar  on

April 28, 2001.  It was a suit for declaration

that the recovery sought by the Corporation was

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barred by time since cause of action had arisen

in 1991 and proceedings were not initiated for

a  long  time.  It  was  also  the  case  of  the

Company that cancellation of loan agreement by

the Corporation was  ex parte,  unilateral and

hence illegal.

5. It  may  be  stated  that  the  suit  was

filed by two plaintiffs.  Plaintiff No. 1 was

the  Company  (appellant  No.  1  herein)  and

plaintiff No. 2 was Ram Raj Singh (respondent

No. 2 herein) who is a practising Advocate. It

was stated in the plaint that plaintiff No. 1

was  a  Company  and  plaintiff  No.  2  was  a

Director who was authorized to file a suit on

behalf  of  the  Company-plaintiff  No.1.  On

January 19, 2002 an application was filed by

the plaintiffs under Order XXXIX, Rules 1 and 2

of  the  Code  of  Civil  Procedure,  1908

(hereinafter  referred  to  as  ‘the  Code’)  for

interim injunction restraining the Corporation

from selling hotel or property of plaintiff No.

1-Company.  On February  20, 2002,  application

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was allowed and the defendants were restrained

from  selling  the  land  and  building  of  the

plaintiffs.

6. Being  aggrieved  by  the  order  of

injunction  passed  by  the  trial  Court,  the

Corporation  preferred an  appeal being  Appeal

against Order No. 120 of 2002 under Order XLIII

Rule 1 of the Code on May 31, 2002.  On June

01,  2002,  the  High  Court  after  hearing  the

parties  directed  the  Company  to  deposit  an

amount of Rs. Fifty lakhs in the Court within

45 days.  The matter was ordered to be listed

on  July  26,  2002.   The  company  filed

Miscellaneous Application No. 4347 of 2002 on

July 10, 2002 contending that the appeal filed

by the Corporation was barred by limitation.

The High Court directed the Corporation to file

reply.

7. On August 02, 2002, according to the

appellants,  Board  of  Directors  of  Company

passed a resolution to remove respondent No. 2

– Ram Raj Singh as Director of the Company. By

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the  same resolution,  it authorized  appellant

No. 2 Avdesh Kumar to prosecute the suit and

other proceedings.

8. Immediately  thereafter  on  August  05,

2002, respondent No. 2 Ram Raj Singh instituted

Miscellaneous Application No. 4839 of 2002 in

Appeal against Order No. 120 of 2002 in the

High Court of Uttranchal to delete his name

from  the  array  of  parties  in  the  appeal

alleging therein that he was not aware of any

suit being filed through him and he had not

signed the plaint. It was alleged by him that

fraud was committed by showing him as plaintiff

No. 2 and filing suit for and on behalf of the

Company. It was a case of impersonation. He,

therefore, prayed for deletion of his name and

to  take  appropriate  proceedings  for

unpardonable  fraud  committed  by  the  persons

responsible.

9. On  August  09,  2002,  an  impleadment

application was made by appellant No. 2 Avdesh

Kumar to be joined as plaintiff in the suit.

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Likewise,  on  December  11,  2002,  he  made  a

similar application for impleadment in Appeal

against Order No. 120 of 2002 being Director of

the Company as also guarantor for payment of

loan.  The application was allowed on December

14, 2002 by the High Court and he was ordered

to be impleaded.

10. The High Court then heard the Appeal

against Order and by the impugned order dated

May  06,  2003  disposed  of  the  appeal  after

hearing the learned counsel for the Corporation

and the learned counsel for Ram Raj Singh.  It

observed that according to Ram Raj Singh, he

had not signed the plaint and yet he was shown

as plaintiff No.2. Thus, the suit was filed by

resorting  to  impersonation.  The  Court,

therefore, held that since Ram Raj Singh did

not sign the plaint, he could not be said to be

plaintiff No. 2.  As such the plaint could not

be said to be signed by an Authorized Officer

and suit by plaintiff No. 1-Company also did

not survive and was liable to be dismissed. The

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High Court held that the appeal was liable to

be  dismissed.  Even  the  suit  had  become

infructuous. According to the High Court, no

such suit could have been instituted.

11. The  High  Court  also  observed  that

fraud had been played to abuse the process of

law. Central Bureau of Investigation (CBI) was,

therefore, ordered to register a case against

the  Company  and  its  Directors  and  to

investigate the matter as to who had played

fraud and to prosecute the persons as found

guilty in investigation.

12. It was the case of the Company that no

hearing was afforded either to the Company or

to Avdesh Kumar who was already impleaded in

the appeal. The order of the High Court was in

violation of principles of natural justice and

fair play.  Review application was, therefore,

filed by the appellants herein. The High Court,

however,  dismissed the  Review Application  by

the second impugned order dated May 28, 2003

inter alia observing that when the Court held

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that no suit could have been instituted by the

Company-plaintiff No. 1 in view of the case of

the plaintiff No. 2 Ram Raj Singh that he had

not signed the plaint and was never plaintiff

No. 2. There was thus no suit in the eye of law

and the appeal also did not survive. According

to  the  Court,  therefore,  no  order  of

impleadment  of  Avdesh  Kumar  could  have  been

passed on December 14, 2002. Hence, that order

was also set aside by the High Court dismissing

review petition.

13. Both  the  above  orders  of  the  High

Court of Uttaranchal have been challenged by

the appellant in the present appeals.

14. Notice  was  issued  pursuant  to  which

the parties appeared.  Affidavits and further

affidavits were also filed.

15. We have heard the learned counsel for

the parties.

16. The learned counsel for the appellants

strenuously contended that the orders passed by

the High Court are totally illegal, unlawful

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and violative of basic principles of natural

justice. It was submitted that order dated May

06,  2003  was  passed  without  hearing  the

affected parties, i.e. appellant No. 1-Company

and  appellant  No.  2  Avdesh  Kumar  whose

impleadment application was allowed as early as

in December, 2002.  Though the impugned order

was  passed  after  about  five  months  of

impleadment of appellant No.2, no hearing was

afforded to any of the appellants.  It was also

submitted that the High Court was wholly wrong

in recalling the order of impleadment of Avdesh

Kumar  passed  in  December,  2002.  It  was

submitted that when the Appeal against Order

was heard and decided on May 06, 2003, Avdesh

Kumar was very much a party-respondent and yet

the High Court did not think it fit to give an

opportunity of hearing to him and decided the

appeal which had caused serious prejudice to

the appellants. It was strenuously urged that

certain  observations  were  made  by  the  High

Court  only  on  the  basis  of  ipse  dixit

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allegations of Ram Raj Singh that fraud was

committed against him and he had not signed the

plaint.  The counsel submitted that CBI has

investigated the matter and has submitted the

report wherein it was expressly observed that

Ram Raj Singh had signed the plaint and had

filed a suit.  It was, therefore, submitted

that  the  orders  passed  by  the  High  Court

deserve to be set aside by remitting the matter

for fresh disposal in accordance with law.

17. The learned counsel for respondent No.

2 Ram Raj Singh stated that the High Court had

passed  the  order  and  there  is  no  infirmity

therein.

18. The  learned  counsel  for  the

Corporation submitted that substantial amount

is due and payable by the Company and in the

fight between two groups, the Corporation is

deprived of its legitimate dues.

19. Having heard the learned counsel for

the parties, in our opinion, the orders passed

by the High Court cannot be sustained.  It is

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clear that the suit was filed by two plaintiffs

as early as in April, 2001.  Plaintiff No. 1

was the Company and plaintiff No. 2 - Ram Raj

Singh  was  shown  to  be  a  Director.   An

application under Order XXXIX of the Code was

filed  wherein  interim  relief  was  granted.

Appeal  against  Order  was  filed  by  the

Corporation  and  only  in  August,  2002,  a

Miscellaneous Application was filed by Ram Raj

Singh to delete his name alleging that he had

not singed the plaint and he was fraudulently

described and shown as plaintiff No. 2 in the

suit.  It is unfortunate that the High Court

decided the matter without hearing the present

appellants,  i.e. appellant  No. 1-Company  and

appellant No. 2–Avdesh Kumar whose impleadment

application was allowed on December 14, 2002 by

the  High  Court  and  the  High  Court  was,

therefore,  aware  that  he  was  very  much  on

record.  The learned counsel for the appellants

is also right in contending that the High Court

virtually decided the matter on the basis of

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one  sided  version  of  Ram  Raj  Singh  who  had

alleged that fraud was committed against him.

This is clear from what is stated by the High

Court.

20. The High Court while disposing of the

appeal inter alia observed;     “The plaintiff No.2 in the suit is practicing  advocate  of  the  Lucknow Courts and is present in the Court. He made statement at Bar that he did not file any suit. The suit was filed by resorting to impersonation. He did not make signatures on the plaint and the affidavit. The plaintiff No.1 has not been  arrayed  through  any  of  its Directors. The plaintiff No.2 has also not  been  mentioned  in  the  array  of parties  to  be  the  Director  of  the Company. In view of the statement made by Sri Ram Raj that he ha snot filed the  suit  in  question  and  he  is  not prosecuting  the  suit,  the  suit  is liable  to be dismissed on behalf of plaintiff  No.2  and  the  suit  also cannot proceed on behalf of plaintiff No.1,  as  the  Company  ha  snot  been arrayed as party through any Director. Therefore,  the suit is liable to be dismissed.  Consequently  the  impugned order  has  merged  in  the  order  of dismissal of suit, which has rendered the appeal as infructuous. The appeal is  dismissed  accordingly  as  having become infructuous”.

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21. Granting liberty to Ram Raj Singh to

take legal recourse against those persons who

had played fraud upon him, the Court proceeded

to state;

   “However, Shri Ram Raj, advocate is at liberty to take legal recourse against those persons who have played fraud upon him. Sri Ram Raj, advocate and learned counsel for the appellant have submitted that a fraud has been played  to abuse the process of law, therefore,  this  Court  may  order  the CBI to register a case against company and its Directors and investigate as to who has played fraud. Having regard to  the  seriousness  of  the  fraud played,  we  direct  the  S.P.,  CBI  to investigate the matter personally and prosecute  the  person  who  is  found guilty in investigation. Record of the Civil  Suit  No.111  of  2001  shall  be kept  in  sealed  cover  and  shall  be handed  over  during  the  course  of investigation to S.P., CBI”.

22.  The  counsel  submitted  that  had  an

opportunity  been afforded  to the  appellants,

they could have shown that it was not correct

that Ram Raj Singh had not signed the plaint or

fraud had been committed by the Company or any

officer  of  the  Company.  According  to  the

learned counsel, on the contrary, CBI made the

1

inquiry and submitted the report wherein it was

specifically observed that Ram Raj Singh was

not  right  when  he  asserted  that  he  had  not

singed the plaint and that fraud was committed.

According to CBI, it was Ram Raj Singh who had

filed the suit, was shown as plaintiff No. 2

and it was his signature in the proceedings.

23. In  our  opinion,  the  learned  counsel

for the appellants is also right in contending

that when present appellant No. 2 Avdesh Kumar

was impleaded in December, 2002 as party and

was  very  much  on  record  in  Appeal  against

Order, opportunity ought to have been afforded

to him as to whether the Appeal from Order had

become infructuous and whether the suit would

not survive. To us, it appears that the High

Court followed an easy path unknown to law when

it rejected Review Petition on May 28, 2003 by

recalling the order passed on December 11, 2002

virtually rectifying the order passed on May 6,

2003. In our considered opinion, the High Court

ought  to  have  extended  an  opportunity  of

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hearing before passing order dated May 6, 2003

as also dated May 28, 2003 to appellant No.1-

Company  as  well  as  to  appellant  No.2-Avdesh

Kumar.  

24. As  to  the  report  of  CBI  and  prima

facie case found against Ram Raj Singh in the

investigation  undertaken,  it  would  not  be

appropriate to state anything one way or the

other. Since we are of the view that both the

orders passed by the High Court are liable to

be  set  aside  only  on  the  ground  of  non-

observance  of  natural  justice,  the  matter

should be remanded to the High Court for fresh

disposal in accordance with law. Observations

made by this Court may adversely affect one or

the other party and it is not appropriate to

express  any  such  opinion.  We  are,  however,

convinced that both the orders dated May 06,

2003 and May 28, 2003 passed by the High Court

are liable to be set aside.

25. In  the result, both the appeals are

allowed.  Orders dated May 06, 2003 and May 28,

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2003 are hereby set aside.  The matters are

remanded to the High Court for fresh decision

in accordance with law after giving opportunity

of hearing to all the parties.

26. Before parting with the matter, we may

clarify that we may not be understood to have

expressed  any  opinion  on  the  merits  of  the

matter, one way or the other.  As and when the

matter will be placed before the High Court, it

will be decided on its own merits without being

influenced by any observations made by it in

the impugned orders or by us in this judgment.

27. Ordered accordingly.  On the facts and

in the circumstances of the case, there shall

be no order as to costs.

CIVIL APPEAL NO.  6282  OF 2008 @ SPECIAL LEAVE PETITION (CIVIL) NO.5593 OF 2007

28. Leave granted.

29. The present appeal is an offshoot of

appeals arising out of Special Leave Petition

(Civil) Nos. 10554-55 of 2002 titled M/s Hanu

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Motels Pvt. Ltd. v.  U.P. Financial Corporation

Ltd. & Anr.

30. So far as the facts of the case are

concerned, we have stated them in detail in the

above  appeals  and  it  is  not  necessary  to

reiterate them here. It may, however, be stated

that in the light of the directions issued by

the High Court in the order dated May 06, 2003

in Appeal against Order No. 120 of 2002 that

the  Central  Bureau  of  Investigation  (CBI)

should  take  appropriate  steps  against  the

persons  who  had  played  serious  fraud  by

investigating the matter and by prosecuting the

persons found guilty in investigation that CBI

made the inquiry and submitted the report.

31. In  the  report,  CBI  collected

documentary and oral evidence which established

that Ram Raj Singh had filed Declaratory Suit

No. 111 of 2001 in the Court of Civil Judge

(Senior  Division),  Haridwar.   He  signed  the

plaint, vakalatnama and affidavit in the suit.

Oral and documentary evidence collected by CBI

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also revealed and the investigation established

that Ram Raj Singh was a Director of M/s Hanu

Motels Pvt. Ltd.

32. In the light of the findings of CBI,

the Registrar General of the High Court filed a

Complaint No. 297 of 2005 against Ram Raj Singh

that he intentionally and deliberately made a

false statement before the High Court to the

effect that he did not file any suit in the

Court  of  Civil  Judge  (Senior  Division),

Haridwar, he did not put signatures on plaint

and affidavit and was not prosecuting a suit

nor he had been a Director of M/s Hanu Motel

Pvt. Ltd. and the suit was filed by resorting

to  impersonation.   According  to  Registrar

General  by  doing  so,  Ram  Raj  Singh  had

committed an offence punishable under Section

193, Indian Penal Code, 1860.  He, therefore,

prayed that accused Ram Raj Singh be summoned

and tried in accordance with law.

33. Accused Ram Raj Singh in view of the

complaint  filed  by  Registrar  General  of  the

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High Court made an Application for Direction

No. 11659 of 2006 in Appeal against Order No.

120 of 2002 praying therein that no cognizance

should  be  taken  of  the  investigation  by

Inspector, CBI and for quashing of proceedings.

34. The High Court by the impugned order

dated December 22, 2006 quashed the proceedings

inter alia observing that proceedings initiated

by  the  Registrar  General  were  without

jurisdiction and not maintainable. They were,

therefore, liable to be quashed.  Accordingly,

the proceedings were quashed by the High Court

by  granting  liberty  to  pass  fresh  order  in

accordance with law.

35. Since  we  have  allowed  the  appeals

filed  by  the  appellants  in  the  connected

matters and set aside the order passed by the

High Court by remitting the matter to the High

Court for fresh disposal in accordance with law

after affording opportunity of hearing to all

the parties, in our opinion, this order also is

liable to be set aside.  Since the High Court

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will  consider  the  entire  material  on  record

including report of CBI, it is obvious that the

High Court will pass appropriate order in the

light of materials placed before the Court.

36. For the foregoing reasons, the appeal

deserves  to  be  allowed  and  is  accordingly

allowed.  The order dated December 22, 2006

passed by the High Court in Application for

Direction No. 11659 of 2006 in Appeal against

Order No. 120 of 2002 is set aside and the

matter is remitted to the High Court for fresh

decision in accordance with law after affording

opportunity of hearing to all the parties.

37. Ordered accordingly. On the facts and

in the circumstances of the case, there shall

be no order as to costs.

……………………………………………………J. (C.K. THAKKER)

………………………………………………J.      (D.K. JAIN)

NEW DELHI,

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October 24, 2008.

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