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PETITIONER: GOWRISHANKAR & ANR.

       Vs.

RESPONDENT: JOSHI AMBA SHANKAR FAMILY TRUST & ORS.

DATE OF JUDGMENT:       22/02/1996

BENCH: AHMADI A.M. (CJ) BENCH: AHMADI A.M. (CJ) MUKHERJEE M.K. (J) MANOHAR SUJATA V. (J)

CITATION:  1996 SCC  (3) 310        JT 1996 (2)   560  1996 SCALE  (2)454

ACT:

HEADNOTE:

JUDGMENT:                          O R D E R      Special leave  granted. Heard  the learned  counsel for the parties.      This appeal  is directed against the judgment and order dated July  11, 1995  rendered  by  the  Madras  High  Court disposing of  two Original  Side appeals.  Facts leading  to this appeal and relevant for its disposal are as under.      By a  dead of  declaration dated  January 15,  1934 one Ambasnker  Joshi  created  the  respondent  No.  1-Trust  in relation to  his three immovable properties, one of which is house and  ground No.  429 (new  No. 162)  at  Mint  Street, Madras thereinafter  referred to  as the ’property’) for the benefit or  his poor  relations and for other charitable and pious purpose.  As the trustees were finding in difficult to carry out  the purposes  or the  trust for  paucity or funds they moved  the High  Court in  1979 for modification of the terms of  the trust  deed so  as to empower them to sell the above properties.  By its  order dated November 23, 1983 the High Court  granted such power subject to the condition that it would  be exercised only with the permission of the Court and the concurrence of 3/4th on the total number of trustees in office.      Armed with  the above order the trustees invited offers for purchase  of the  property and on receipt of some offers sought permission  of the High Court to sell the same at the highest price offered which was granted on February 9, 1984. However, inspite  of the permission so granted, the trustees did not  sell the  property at  the highest  price  offered, which was  Rs. 3,15,000/-  till then,  and  instead  thereof invited, and  received, fresh  offers including one from the respondent Nos.  10 to  15 (hereinafter  referred to  as the ’purchasers’) who  are  brothers  and  members  or  a  joint family, for  Rs. 9,00,000/-.  By a resolution dated December 7, 1989  the trustees  accepted the  offer of the purchasers

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and entered  into a  formal agreement  for sale with them on December 15,  1989, after  receiving a sum of Rs. 1,50,000/- an earnest  money. Then  on January  15, 1990,  the trustees applied for  the clearance  certificate required  under  the Income Tax Act for sale of the property. A week thereafter - on January 23, 1990 to be precise the appellants herein sent a latter to the trustees which reads as under:      "By an  order dated  9th  February,      1984 in  Application No. 68 of 1984      in C.S.  NO. 530  of 530 of 1979 on      the Original side of the High Court      at Madras  His Lordship Mr. Justice      Sangottuvelan was pleased to permit      the trust,  the  applicant  in  the      above  Application   to  sell   the      immovable property to together with      the superstructure  therein bearing      door No.  162 (old  No. 420),  Mint      Street, Madras  - 79 at the highest      price offered.      As offers  were not  called for  by      one publication  in the  press  for      which we  were waiting  so far,  we      are  now   offering  for  the  said      property    together    with    the      superstructure,    fittings     and      fixtures, being  door No. 162 (new)      Mint Street, Madras 79 a sum of Rs.      14,20,000/- (Rupees  Fourteen Lakhs      and  Twenty  thousand  only)  which      price is negotiable.      We have  been in  occupation of the      said  promises   for  over  a  half      century running a Hotel Industry, a      portion thereof  being occupied for      our personal  residential purposes,      paying rent  to the Trust regularly      and  without   default  during  all      these years.  Since we  are  keenly      interested  in   the  property   we      therefore request  you to  consider      the  offer,   which  is  negotiable      favorably. Kindly  acknowledge  and      let us  have a  favorable reply  at      the earliest.           Thanking you."      In  acknowledging   the  above   letter  the   trustees intimated the appellants, by letter dated February 26, 1990, that  their   offer  to   purchase  the   property  for  Rs. 14,20,000/-, would  be placed  before  the  meeting  of  the trustees and  the decision  taken would  be communicated  to them; and  accordingly, asked them to wait for the result of the meeting.      Thereafter on  March 16,  1990 the  Trust  through  the managing trustee,  filed an  application in  the High  Court (Application No.  1660 of  1990) seeking  permission to sell the property  to  the  purchasers  for  Rs.  9,00,000/-  as, according to  them, it was the highest offer, and to execute and register the necessary deed of sale.      By an order dated March 29, 1990 a learned Judge of the High Court  granted the  permission sought  for and directed the trustees  to invest the sale proceeds, in such manner as the Majority of them might deem fit and proper., Pursuant to the said  order said  deeds were  executed in  favour of the purchasers on  April 12,  1990 and  all the  tenants of  the

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property ,  including the appellants, were intimated of such sale.      Thereafter on  July  3,  1990  the  appellants  sent  a notice, through  their Advocate,  to the Trust, the trustees and the  purchasers alleging that they had played a fraud on the Court,  the Registration  Department and  the income-tax Department when  they declared  that the  property fetched a highest offer  of Rs. 9,00,000/- as its price, in that, they suppressed the  fact that  they (the appellants) had offered to purchased  the  property  for  Rs.  14,20,000/-.  It  was further alleged  that the  purchasers were  aware  of  their offer as  they were informed of the same through one of them (respondent No.  11). The  appellants gave  out that in case the property  was not  said to  them at the price offered by them on  or before  July 10,  1990 they would not only taken action to  set aside  the said but lodge complaints with the registration and  income tax  departments and  also move the High Court  for taking  action against  the Trust for filing false affidavit.  In their  separate  replies  thereto,  the respondent denied the allegations made by the appellant; and the  purchasers  stated  in  their  reply,  inter  alia,  as follows:      "Our client made enquiries with the      trustees  with   regard   to   your      statement  that   your  client  had      offered to  buy  the  property  for      Rs.14,20,000/- by  his latter dated      23rd January  1990. Our  client had      issued  the   letter,  he  did  not      evince any  interest in  finalizing      the transaction not did he take any      further   steps    for    effecting      purchase. It  is also stated by the      Vendors (trustees) that your client      had   sought    completes    vacant      possession  and   stipulated  other      conditions making  it clear that he      was not keen on buying the property      but only wanted to stop any sale of      the  property   so  that  he  could      continue  in   the  premises  as  a      tenant. Your  client  is  occupying      the promises  on a nominal rent and      he   was   always   interested   in      continuing in  the premises  on the      same terms.           Our client further states that      the trustees  had informed him that      your client  had claimed  from them      some to  vacate the premises, which      the trustees  and  declined.  After      our client  purchased the  property      when    the     demanded     vacant      possession,   your   client   again      demanded  payment  of  Rs,  2  lacs      which was  refused by  our  client,      who threatened to take legal action      by evicting him from the premises."      In view  of the  stand so taken by the respondents, the appellants filed  an application on July 28, 1990 (being No. 801 of 1990) for setting aside the order permitting the sale in favour of the purchasers. In the application they stated, inder alia, as follows:-      "The first Respondent ought to have      informed  this   Hon’ble  Court  my

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    offer   of   Rs.   14,20,000/-   as      otherwise the  Hon’ble Court  would      not have permitted for the sale for      Rs, 9,00,000/-.  Obviously a  fraud      had  been   committed   and   raise      affidavit   has   been   filed   to      misconduct this Hon’ble Court.      Respondents 10  to  15  were  quite      aware or  my offer  much before the      filing of  the application and they      have colluded with respondents 1 to      9 in  knocking  away  the  Schedule      property for Rs. 9,00,000/-."      In contesting  the  application  the  managing  trustee filed a counter affidavit detailing the facts leading to the passing of  the order  permitting the  said of  the property (which we  have noticed  earlier). He  categorically  denied that there  was any  fraud or  collusion with the purchasers and asserted that the trustees had acted bona fide. In their counter affidavit the purchasers claimed that they were bona find purchasers  and they had no knowledge whatsoever of the alleged  offer   made  by   the  appellant.   Besides,  they reiterated the  stand taken  by them  in their  reply to the notice of  the appellants  dated July  3,  1990.  While  the application  for   setting  aside   the  sale  was  awaiting disposal,  the  appellants  filed  a  further  affidavit  on January 19,  1994  offering  to  pay  a  total  sum  of  Rs. 19,40,000/- for purchasing the property.      After hearing the parties and taking into consideration all facts,  including the  above offer,  the  learned  Judge allowed the  application principally  on the ground that the trustees had  played fraud  on Court  by not  disclosing the highest offer  of the applicants (the appellants herein) and colluding with  the  purchasers  and  passed  the  following order:      "That on  receiving a  sum  of  Rs.      19,40,000/- (Rupees Nineteen lakhs,      and forty  thousand only  ) the Ist      Respondent herein,  do execute  and      register and  sale deed  in respect      of the  property more fully set out      in the Schedule hereto in favour of      the Applicants herein;      That from  and out of the said sale      consideration      the      earlier      Purchasers/Respondents  11   to  15      herein, shall  be paid a sum of Rs.      9,00,000/- (Rupees Nine lakhs only)      together with the cost of the stamp      papers and the Registration charges      and that  the balance  amount shall      be appropriated for the Trust; and      That the  Respondents 1 to 8 herein      (the trustees)  do pay that cost of      Rs. 10,000/-  (Rupees ten  thousand      only) to  the Respondents  11 to 15      herein, and the said costs shall be      borne by  them personally  and  not      out of the Trust Fund."      Aggrieved  by   the  above  order  the  trust  and  the purchasers  preferred   two  separate   appeals  before  the Division Bench  (’Bench’ for  short) which  were allowed and the order  of the  learned Single  Judge was  set aside.  In setting aside  the order  the Bench held that the finding or the learned  Judge that  the permission to sold the property

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was obtained  by fraud  was patently wrong and the the offer of the  appellants was  not a bona fide one. It further held that the purchasers had bona fide purchased the property for value without  notice of  the offer  of the appellants dated January 23, 1990. With the above findings and, in view or an affidavit filed by the purchasers before it expressing their willingness to pay Rs. 19,40,000/- for the before the Single Judge the bench passed the following order:      "Consequently, we direct Respondent      10 to  15  to  pay  a  sum  or  Rs.      10,40,000/-  being  the  difference      between the  amount already padi by      them  as   sale   price   for   the      properties  and   the  sum  of  Rs.      19,40,000/-. The  said amount shall      be paid  to the  trust on or before      30.9.1995.      With  the   above  directions,  the      appeals are  allowed. The  order of      the  learned   Single  Judge  dated      2.2.1995   is    set   aside.   The      Applicant shall  pay the  costs  of      the appellants  in each appeal, the      counsel’s  fee   is  fixed  at  Rs.      5,00/-."      Having  heard  the  learned  counsel  for  parties  and carefully perused  the entire  materials on  record  we  are unable to  sustain the  impugned order. Admittedly, in their application filed  on March  10, 1990, seeking permission to sell the  property the  trustees did  not disclose the offer made by  the appellants  on January 23, 1990 and, as already noticed, such  non-disclosure prompted  the Single  Judge to conclude that  the  respondents  practised  fraud  upon  the Court. The  Bench, on  the order  hand, held that failure on the part of the trustees to make a reference to the offer of the appellants while seeking permission of the Court to sell the property  did not  amount to  fraud on  their  part.  It appears that  in arriving at the above conclusion, the Bench relied upon  the following  statements made  in the  counter affidavit filed  by the trustees in opposing the application of the  appellants for  setting aside the sale as, according to the  Bench, those  statements were  not  controverted  by filing a reply thereto:           "However, since  an offer  was      made  by   the  Applications,   the      Trustees discussed  the matter.  In      the course  of the  discussion,  it      was made  known to  the  Applicants      that the sale of the property would      be as is where is condition and the      Applicants that  the  sale  of  the      property would  be as  is where  is      condition and  the Applicants  were      required to  confirm that the offer      would be  for sale  without  vacant      possession. The Applicants promised      to come  back, but  never responded      thereafter. The  Applicants did not      follow up the matter further and it      was very  evident from  the conduct      of the  Applicant  that  they  were      only trying  to protract the matter      and put  for in  the agreed sale to      Seshmal Jain and five others.           I state  that  the  Applicants

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    were aware  of the offer of Seshmal      Jain  and   five  others   and  the      agreement entered  into with  them.      The attempt  of the  Applicants was      only to  shortage the said proposed      sale. The Applicants were occupying      substantial portion of the property      for a nominal rent of Rs. 275/- and      they had succeeded in their attempt      at  preventing   the  sale  of  the      property  for   the  post  so  many      years.  Even  after  obtaining  the      Court permission in 1984, they were      able  to   prevent  the   sale   by      dissuading  intending   purchasers.      They merely  wanted to  continue in      the property paying a nominal rent,      which would  be  possible  only  if      they continued to own the property.           I state  that  the  Applicants      were aware  of every  step that was      being taken towards the sale of the      property.           Adverting  to  para  7,  state      that at  the time  the  Application      was made  to  this  Hon’ble  Court,      there was  not valid  offer by  the      Applicants    as    alleged.    The      Applicants had made an offer on the      23rd January,  1990, but had wanted      vacant possession.  Since that  was      not possible,  they had not pursued      the offer,  it was evident from the      conduct of the Applicants that they      were not  serious about the alleged      offer made  on 23rd  January  1990.      The trustees  have acted bona fide.      I stoutly  deny the averment that a      fraud  was  committed  or  a  false      affidavit filed  as alleged  by the      Applicants  nor  was  this  Hon’ble      Court misdirected."                      (emphasis supplied)      In our  considered view the above approach of the Bench in dealing with the matter was patently wrong for instead of deciding the  moot question  as to  whether the trustees had suppressed  the   offer  of  the  appellants  while  seeking permission of  the High  Court  to  sell  the  property  and thereby committed fraud upon the Court, the Bench went on to decide whether  the appellants’  offer was  a bona  fide one necessitating its  disclosure and  answered the  same in the negative accepting the belated ... and, as the discussion to follow will  indicate the  specious plea  put forth  by  the trustees in  that regard while contesting the application of the appellants  for setting  aside the  sale.  As  has  been already  noticed  as  early  as  on  January  23,  1990  the appellants had  made the  offer to purchase the property and in replying  thereto by their letter dated February 26, 1990 the trustees  not only stated that the offer would be placed before the  meeting of  the trustees  but also intimated the appellants that  they would  be informed  of  the  decision. Surprisingly, however,  instead of  informing the appellants about the  decision, if any, taken as promised, the trustees filed  within   a  fortnight   or  their   above  reply  the application seeking  permission to sell the property wherein

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they did  not disclose  the appellants’  offer  and  on  the contrary stated, inter alia, as follows:      "The applicant  states that  by the      Order dated 9th February 1984, this      Hon’ble  Court  had  permitted  the      Trustees  to   sell  the   schedule      property  at   the  highest   price      offered. The  Applicant is  advised      and believe  the same  to  be  true      that in  view of  the order of this      Hon’ble Court,  it would  in  order      for the  Trust to sell the property      at  the   aforesaid  highest  offer      received. However, the Applicant by      way of  abundant caution  has  been      advised to  approach  this  Hon’ble      court to  pray  for  and  obtain  a      specific permission for the sale of      the  schedule   property   at   the      aforesaid  highest   offer  of  Rs.      9,00,000/-.      The  Applicant  states  that  apart      from  calling   for   offers,   the      Trustees have  made  enquiries  and      have  been   duly  satisfied   that      taking into  account the nature and      condition  of   the  building,  the      number  of  tenants  occupying  the      building  and  the  fact  that  the      property is  sought to  be sold  in      "as is  where is"  condition  along      with  the  tenants  without  vacant      possession  being   given  to   the      purchaser,  the  price  offered  is      reasonable.  The  trust  have  also      applied for an Income-tax Clearance      Certificate as  a pre-condition  to      the  said   and  the   income   tax      authorities   have,    after    due      enquiries,  issued   a  Certificate      under    enquiries,     issued    a      Certificate under  Section 230-A of      the income tax Act.      The applicant  states that  if  the      property is not sold at the highest      offer now  received,  it  would  be      difficult  to   secure   other   or      further offers  for  the  property,      which is  deteriorating day by day.      Considering the  meagre return from      the property,  it would  not be  in      the  interests   of  the  trust  to      retain the property as such."                      (emphasis supplied)      The assertion  made by the trustees in the above quoted passage that  in spite  of their best efforts they could not get any offer above Rs. 9,00,000/-, which obviously referred to the  offer made by the purchasers, was patently incorrect and untrue; and, there cannot be any manner of doubt that by making those  incorrect and untrue statements they persuaded the Court  to grant  permission to  sell the  property for a price of  Rs. 9,00,000/-. If really the trustees were acting bona fide  in dealing  with property it was expected of them to first  disclose the  offer of  the  appellants  and  then placed their  inability to  accept the  same  detailing  the

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reasons  therefore   instead  or  so  doing  not  only  they suppressed that  offer but  asserted in  no uncertain  terms that the  highest  offer  received  by  them  was  from  the purchasers and that it would be difficult to secure other or further offers  for the  property. The Bench however did not consider   the   above   facts   and   circumstance,   which unmistakably indicated  the oblique designs of the trustees, from a proper perspective and proceeded to upset the finding or the Single Judge on the tenuous ground that their failure to disclose  the appellants’  offer was  justified as it was not a  bona fide one. It is pertinent to point out here that the trustees raised the issue regarding the bonafides of the appellants’ offer  only in  support of  their  inability  to accept the  same and  not  in  justification  of  their  non disclosure as held by the Bench.      Equally unjustified  was the  Bench in  concluding that the offer  of the appellant was not a bona fide one, relying solely upon certain statements made by the trustees in their counter affidavit (quoted earlier) as according to the Bench they were  not controverted  through a rejoinder. Even it we proceed  on   the  basis   that  those  statements  remained uncontroverted still  they cannot  be relied upon as they do not stand  the test  or probability and were clearly made as on after  thought. According  to the  trustees’ version made therein they discussed about the offer of the appellants and then made  it  known  to  them  (the  appellants)  that  the condition’; and  therefore  they  asked  the  appellants  to confirm that  the offer  would be  for sale  without  vacant possession but  the appellants  did not  respond though they had promised to come back. Certain other averments have also been made  therein to  contend that  the appellants were not serious  about   the  offer.  No  correspondence  much  less contemporaneous record,  nor any other material was produced before the  Court in  support of the above claim made in the counter affidavit.  At the  risk of  repetition, it  may  be recalled that they would discuss about their offer and asked them to wait for their decision. Instead of keeping to their promise of communicating their decision they moved the Court a few  days later  where they  took a diametrically opposite stand. It  is evident  therefore that  there  was  no  basis whatsoever for  the trustees to contend, and for that matter the Bench  to rely  upon only  the  bald  statement  of  the trustees to  hold that the appellants were not serious about their offer.      For the  foregoing discussion  it must be held that the trustees obtained the permission to sell the property to the purchasers practising  fraud upon  the Court  and in view of the  following   observation   of   this   Court   in   S.P. Chengalvaraya Naidu vs. Jagannath [(1994) 4 SCC ] :      "It is  the settled  proposition of      law  that   a  judgment  or  decree      obtained by  playing fraud  on  the      court is  a nullity  and non est in      the   eyes    or   law.    Such   a      judgment/decree  -   by  the  first      court or  by the  highest court has      to be treated as a nullity by every      court,    whether    superior    or      inferior, it  can be  challenged in      any  court   even   in   collateral      proceedings." the question  whether the  purchasers purchased the property bona fide  subsequent to  the permission  so granted without notice of  the  appellants’  offer  is  immaterial  in  this appeal. We  therefore  allow  this  appeal,  set  aside  the

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impugned order  and keeping  in view  the fact that both the appellants  and   the  purchasers  subsequently  offered  to purchase the  property for Rs. 19,40,000/-, remit the matter to the  Division Bench  of the  High Court to call for fresh offers from  them, which, needless to say, shall not be less than the  above amount the grant permission to sell the same at the higher offer received on such terms as law and equity may demand.  The appellants  shall be  entitled to  costs of this appeal  from  the  trustees  which  we  assess  at  Rs. 10,000/-.