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CASE NO.: Appeal (civil) 2770 2000

PETITIONER: WESTERN PRESS PVT LTD., MUMBAI

       Vs.

RESPONDENT: THE CUSTODIAN & ORS.

DATE OF JUDGMENT:       06/12/2000

BENCH: B.N.Kripal, Doraswamyy Raju, Brijesh Kumar

JUDGMENT:

Raju, J. L.....I.........T.......T.......T.......T.......T.......T..J

     The appellant before us was the unsuccessful applicant in Miscellaneous Application No.2 of 1999 before the Special Court  (Trial  of  offences   relating  to  transactions  in securities)  at  Bombay  (called  for  convenience  as  the Special Court).  The appeal has been filed under Section 10 of  the  Special  Court  (Trial   of  offences  relating  to transactions  in securities) Act, 1992 (hereinafter referred to  as  the  Act) against the order of the  Special  Court dated  16.2.2000, whereunder the relief sought to set  aside the  Minutes  of the Order dated 5.7.1995  in  Miscellaneous Petition  No.30  of  1995 and the Order dated  24.9.1997  in Miscellaneous Application No.  280 of 1997 earlier passed by the Special Court insofar as it related to the appellant and the  premises of the appellant situated at Regent  Chambers, Nariman  Point,  Bombay-400 021, on 2nd floor  bearing  unit Nos.  3 & 4 admeasuring approximately 2030 sq.  ft.  came to be rejected.

     The relevant facts insofar as they are necessary for a proper  appreciation of the issues raised before us, need  a brief  mention  before  adverting to the  grievance  of  the parties.  M/s Dhanraj Mills Private Ltd., the 5th respondent in  this appeal, is a notified party under the Act.  On  the information  furnished  by  the Income Tax  Department  that public  money belonging to Banks and Financial  Institutions have  been  siphoned out into the accounts of  the  notified party  and which, in turn, came to be successively  siphoned to  Kenilworth  Investment  Company Private  Ltd.,  the  6th respondent herein, and from them to CIFCO Properties Private Ltd.,  CIFCO  Finance Ltd.  and M/s  Champaklal  Investments (Respondents 2, 3, 4 & 6), the Custodian filed Miscellaneous Petition  No.   30  of 1995 against all  those  respondents. When the petition reached the stage of hearing by consent of parties,  Minutes  of  the Order dated 5.7.1995 came  to  be filed  and  recorded  as  per   which,  among  other  things Kenilworth  Investment  Company  submitted to  a  decree  in favour   of  Dhanraj  Mills  Private   Ltd.,  in  a  sum  of Rs.11,82,81,316/- with interest @ 20% per annum from 24.4.92 till  date  of  payment  and CIFCO Group  of  Companies  and

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Champaklal  Investment Company Private Ltd., submitted to  a decree  in  favour  of the 6th respondent and  the  decretal debts  also  stood  charged in favour of  Dhanraj  Mills  to receive payment from Kenilworth Investment.

     Clause  7  of  the Minutes of the Order  dated  5.7.95 declared  the ownership of the 3rd respondent herein, in the premises  bearing  unit  Nos.  2, 5, 6, 7 and  8  at  Regent Chambers,  Nariman  Point, Bombay, in 2nd floor  admeasuring 4931  sq.  ft and unit No.5 in ground floor admeasuring  451 sq.  ft.  as well as the residential flat bearing unit No.36 in  3rd  floor of Anita Apartment in Mount Pleasant Road  at Malabar Hills admeasuring 575 sq.  ft.  Clauses 8, 12 and 13 on which both parties fixed their hopes read as follows:

     8.   The  Respondent No.2 declares that  one  Western Press Pvt.  Ltd.  (formerly known as Jayakrishna Pvt.  Ltd.) is  the owner of the premises admeasuring approximately 2030 sq.   ft.  and described in Schedule A-3 hereunder  written. The  said  premises are used and occupied by the  Respondent Nos.   2 and 3 along with the said Western Press Pvt.   Ltd. The  Respondent Nos.  2 and 3 declare and undertake to  this Honble  Court that they will not claim any right, title  or interest  in the said premises mentioned in Schedule  A-3. The  respondent  Nos.  2, 3 and the said Western Press  Pvt. Ltd.    undertake  to  this   Honble  Court  that   pending satisfaction of the decree the Respondent Nos.  2, 3 and the said  Western Press Pvt.  Ltd.  will not alienate,  encumber or  part  with  possession of or create third  party  right, title or interest in the said property described in Schedule A-3  hereto  or any part thereof, till the decree herein  is marked satisfied.

     12.   In  the  event  of the  decree  herein  becoming executable  against  the  Respondent Nos.1 and 2 or  3,  the Respondent  No.2 and the Companies listed in Schedule C as well  as  the  said Western Press Pvt.  Ltd.  and  the  said employee  occupying the flat as per Schedule A-2,  undertake to  this Honble Court that on sale in execution being  held and sanctioned by this Honble Court the Respondent No.2 and the  said companies mentioned in the Schedule B hereto shall hand  over  the  possession  of the  premises  mentioned  in Schedule A-1 to A-3 hereto to the purchaser.

     13.   The companies mentioned in the Schedules B and C  and  the said employee will within one week from  today file  separate affidavits declaring that they have no right, title  or  interest in the premises mentioned  in  Schedules A-1  to A-3, hereto as also giving the undertaking to this Honble  Court to vacate the premises in their occupation in the event happening as stated above.

     Pursuant   to   the  above,   the  Chairman   of   the appellant-company  Mr.   Milan  Dalal filed  on  28.7.95  an affidavit  of undertaking not to alienate, encumber or  part with  possession  of or create third party right,  title  or interest  in  the  aforesaid   property  of  the  appellant- company,  till the decree is satisfied and in case of events happening as provided in Clauses 12 and/or 13 of the Minutes of  the Order further undertaking to vacate the premises  in the occupation of the appellant.

     Since  there  was  a   default,  the  Custodian  filed Miscellaneous Application No.280 of 1987 by way of execution

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proceedings  against the respondent-companies which suffered a decree (of course not including or specifically initiating against  the  appellant and their property) and the  Special Court  passed  an order on 24.9.97 appointing a Receiver  to take  possession  and to dispose of the properties by  sale. At  this  stage, apparently apprehending similar  course  of proceedings  for  execution  by the  Custodian  against  the properties  in  question  of  the  appellant,  Miscellaneous Application  No.2  of 1999 came to be filed for the  reliefs noticed  supra.  The sum and substance of the claim in  this application  of  the appellant was (a) that  the  appellant- company is the absolute owner of the properties in question, (b)  that  they  have  not   created  any  interest  in  the properties  in favour of the 3rd respondent herein, (c) that the  undertaking given on behalf of the appellant was  wrong and  unauthorised,  (d) that no such undertaking could  have been given by any one else in respect of the property of the appellant  unless duly authorised by the company (e) that at no  point  of time the appellant was a party to any  of  the proceedings or it was represented by any counsel or was ever been  put on notice of the orders to be passed affecting its rights/interest,  (f)  that  the   appellant  is  neither  a judgment debtor nor it claims through a judgment debtor, (g) that it neither agreed to give guarantee nor stand as surety for  the  payment  of the debts of the judgment  debtor  and consequently  the  properties  of the  appellant  cannot  be attached  or proceeded against in any manner for realisation of the dues under the decree in question.

     The  Special  Court, after a careful consideration  of the respective contentions of parties, held that the Minutes of the order dated 5.7.95 covered also units 3 & 4 belonging to  the  appellant and it would be open to the Custodian  to prefer an appropriate application for execution, as was done in  the  case of units 2, 5 to 8 as and when required.   The Special  Court  also  held that the said two  units  of  the appellant   also  constituted  an   integral  part  of   the compromise.   As  regards  the  ground based  upon  want  of registration,  the  Special Court was of the view  that  the minutes   of  the  order   stood  excepted  from  compulsory registration  and that in any event in view of Section 41 of the  Maharashtra  Co-operative Societies Act, 1960 it  stood also  exempted, having regard to the fact that the interests of  the  appellant in the properties being merely that of  a tenant  in  co-partnership housing society and the right  to occupy  the flats flowing only from the ownership of shares, the  same  cannot  be considered to be  immovable  property. Consequently,  the  application of the appellant came to  be dismissed.  Hence, this appeal.

     Dr.   Rajeev Dhavan, learned senior counsel  appearing for  the appellant, strenuously contended, while reiterating the stand taken before the Special Court, that the appellant is  an  utter  third  party to the  proceedings  before  the Special Court it being neither a notified party nor claiming through  any of the parties and, as a fact, also not  having been  arrayed  as  one such, its properties cannot  be  made liable for the recovery of the dues in question.  It is also further  contended  that  neither  the  appellant  gave  any undertaking  nor  it stood as surety for the realisation  of the  amount secured in the minutes of the order dated 5.7.95 and,  therefore,  cannot  be  said to  have  encumbered  its property   by  any  specific  thing   in  writing  and   the undertaking,  if  any,  given on its behalf is not  only  an unauthorised  one not binding upon the appellant but that it

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has  been  given  also under a mistaken view of  facts  and, therefore, the same could not adversely affect the rights of the  appellant.   Argued the learned senior counsel  further that  in  the  absence of registration  as  envisaged  under Section 17 (1) (b) of the Registration Act, it cannot in any manner  affect  the  rights of the  appellant  in  immovable property  and  that  the   appellants  property  cannot  be proceeded  against.  Shri Shiraz Rustomjee, learned  counsel for  the  Custodian,  while  drawing  inspiration  from  the reasoning  of the Special Court, endeavoured to sustain  the conclusions  arrived  at  by the Special Court.  It  is  the contention  of  the learned counsel that the very object  of the consent order passed on 5.7.95 was to effectively ensure the  recovery  of the dues and it is too late in the day  to retrace steps to disown responsibility and liability in this regard.   The  case on hand is said to squarely  fall  under Section  17  (2) (vi) of the Registration Act and  that  the attempt  of  the appellant is to somehow delay  indefinitely realisation of the dues.  The learned counsel on either side also  elaborately  invited our attention to portions of  the order  under  challenge  to  substantiate  their  respective stand.

     We  have  carefully considered the submissions of  the learned  counsel  appearing  on either side.  In  our  view, apart  from the lack of merits in the challenge made to  the well  considered order of the Special Court, the appellants case  does  not merit countenance in our hands  for  another reason  also.   The parties before the Special Court  having consented  and  invited  the Court to pass the  order  dated 5.7.95  and obtained benefits by giving undertaking of their own  and on behalf of the appellant-company, ought not to be allowed  to  take shelter under technicalities to  overreach the  Court, which believed the parties and counsel appearing on  their  behalf and acted in good faith by  accepting  the terms suggested by the parties themselves.

     The  questions, which loom large for consideration  in this  appeal,  are  as to what are  the  legal  consequences flowing  from  the consent order of the Special Court  dated 5.7.95  and  the  affidavit  filed by Mr.   Milan  Dalal  on 28.7.95  as  the Chairman of the appellant-company?  and  do they   suffer  any  legal  infirmities   such  as  want   of registration, want of authority and mistake of fact so as to render them either non- est or unenforceable?  If it is held that  the consent order dated 5.7.95 and the affidavit dated 28.7.95  are binding upon not only the parties but upon  the appellant,  as  one  who has undertook to abide  by  certain consequences and such an undertaking was given to secure any or  some benefit for any one or more of the parties from the Court,  the  facts such as the appellant not being itself  a party  in the proceedings before the Court and it was only a third  party  and  that the property in question is  of  the appellant and that the appellant is neither a notified party nor one claiming through such notified party or the judgment debtor  pale  into  insignificance and are  rendered  wholly irrelevant in determining the actual issues arising.

     The  Minutes  of  the order dated 5.7.95  came  to  be passed  as  a consent order, decreeing for the  recovery  of Rs.11,82,81,316/-  with  interest  @ 20% and the  manner  in which   such  decree  has  to  be  satisfied  as   well   as proportionate liabilities, inter se, of the parties thereto. The  permission  for payment in instalments sought  for  has been  countenanced.  Clauses 8, 12 and 13 make it abundantly

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clear  that  Respondents  2 and 3 before the  Special  Court declared  that  they  will  not claim any  right,  title  or interest   in   the  premises  in  question   (Schedule   A3 properties) and Respondents 2 and 3 before the Special Court as well as the appellant undertook to the Special Court, not to  alienate, encumber or part with possession of or  create third party right, title or interest in or over the Schedule A3  properties  or any part thereof pending satisfaction  of the  decree  passed  therein.  The  consent  decretal  order further  stipulated that in the event of the decree becoming executable  the Companies including the appellant  undertook to  hand  over  possession of the  properties  mentioned  in Schedules  A1 to A3 to the purchaser, on the sale being held and  sanctioned  by the Special Court.  In carrying out  the directions  contained  in the above consent decretal  order, Mr.   Milan  B.  Dalal, Chairman of  the  appellant-company, filed  the required affidavit of undertaking dated  28.7.95. In  the  said affidavit of undertaking, while affirming  the factum  of  ownership  of Western Press Pvt.  Ltd.,  to  the property  in question and noticing the factual position that the  said  property is being used and occupied by M/s  CIFCO Ltd.   and  CIFCO  Finance  Ltd.,  it  has  been  stated  in unmistakable terms in paragraphs 2 and 3 as follows:-

     2.   In  terms of the Minutes of the order dated  5th July,  1995,  passed by the Honble Special  Court,  Western Press  Pvt.  Ltd., do hereby undertake that not to alienate, encumber  or  part with possession of or create third  party right,  title or interest in the aforesaid premises till the decree is marked satisfied.

     3.   On  behalf of the Company, I hereby undertake  to this  Honble Court that in the events happening as provided in  Clauses  12  and  13 of the said  Minutes,  the  company undertake to vacate the premises in their occupation.

     Though for fixing liability as such the mere fact that the  judgment  debtor  companies and  the  appellant-company being  part  of  the  same  group  of  companies  completely controlled by Dalal family and its group concerns may not be sufficient  as such, the said factual information indicating that  the  cluster  of companies is a mere cloak  for  these groups  will  be  a just and relevant piece of  material  in appreciating  the foul play and attempts on the part of  the Directors  of  the appellant and their opportunistic  stands adopted,  as  it  suits them, from time to  time,  not  only before  the Court below but even in this Court.  Mr.Milan B. Dalal  has  been found to be and seems to have  been  openly allowed  by  others  without  demur to  liberally  play  the multifarious  roles he held in different companies of  Dalal group  families.  Though the authority of Milan B.  Dalal as Chairman  of the appellant-company was seriously  questioned by  another Director of the appellant at a later stage,  the rejoinder  filed  in this appeal by the very same  Milan  B. Dalal,  in  support of the stand of the  appellant-  company patently  betrays  the sinister motive of all those who  are fighting  under the shadow of the appellant-company  harping upon  some  technicalities of law or otherwise unmindful  of the fact realities starring at them, who cannot disown their own  responsibilities too in the matter.  We are constrained to  observe that both the parties as well as their  advisers who have been responsible for the respective roles they seem to  have  played  in misguiding and misleading  the  Special Court  to pass a particular order, assuring the existence of

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certain  obvious  facts, ought not to be allowed  to  either retrace their steps or derive, retain or enjoy the fruits of their  own  machinations and manipulations by  now  assuming different   postures   and  asserting   facts   which   they deliberately  withheld  from the Court and were found to  be giving  a different picture altogether when such orders came to  be  passed.   This condemnable conduct  of  the  parties alone,  in our view, is more than sufficient to reject their claims  now  made  in  desperateness   under  the  cover  of pretended and invented illegalities.

     On  a  careful  consideration  of  the  events   which occurred  before the Special Court which made the said Court to   believe  the  existence  of   certain  facts   on   the representations  made  before it, the orders passed and  the affidavits found and noticed to have been filed from time to time  before the Special Court, the Special Court could  not be  either faulted for its conclusions or that the  specific findings  arrived  at  that the consent order  dated  5.7.95 taken  together  with  the affidavit  of  undertaking  dated 28.7.95  covered  within  its  fold   the  property  of  the appellant-company in question for being proceeded against in execution of the decree passed for recovering the amount due as  declared in the consent order dated 5.7.95, could not be said   to  be  vitiated  in   any  manner   warranting   our interference.  Consequently, it would be permissible for the Custodian to proceed against the property comprised in Units 3 and 4 belonging to the appellant- company also by means of an  appropriate execution application as and when he  choose to  do so.  The plea of lack of authority in Milan B.  Dalal to bind the appellant needs mention only to be rejected even for   the   simple  reason  that   the  Directors   of   the appellant-company,  who allowed Milan B.  Dalal a free  hand as  Chairman  of  the appellant- company to  deal  with  the matter, cannot be permitted to blow hot and cold as it suits them.   Equally  untenable is the pretended mistake of  fact which,  in  our view, is nothing but a self-serving  attempt found  to  be made as a pure afterthought to wriggle out  of the  lawful  commitments  made and retrace the  position  in which  the Directors of the company have allowed  themselves to  be landed in.  So far as the challenge based on the want of  registration under Section 17(1) (b) of the Registration Act  is  concerned,  we  are of the view that  the  same  is neither  genuine nor has any merit whatsoever or capable  of being  countenanced  at our hands.  The reasons assigned  by the Court below to reject the said plea cannot be considered to be either unjust or untenable.  Even otherwise, a careful analysis and consideration of the consent order dated 5.7.95 as  also the affidavit of undertaking dated 28.7.95 made  in this  case  disclose  no intention, per se,  to  purport  or operate  to create, declare, assign, limit or extinguish  in present  or in future any right, title or interest,  whether vested  or contingent in the immovable property of the value of  Rs.   100 and upwards.  On the other hand, the terms  as well  as the tenure of the above proceedings make clear  the dominant  intention  and  purpose of them to  be  merely  an undertaking given by a third party to the proceedings to the Court  to  abide  by a particular course of  action  if  the judgment-debtor  fails to satisfy the decree.  Even in cases of  such  default by the judgment-debtor in this  case,  the undertaking  as well as the consent decree only enables  the Custodian  to  initiate  execution proceedings  against  the properties  in question of the appellant- company and it  is only  in the event of such sale, the question of coming into existence  any  document  which   would  require  compulsory

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registration under Section 17 of the Act would arise and not at  this  stage.   In  substance and effect  what  has  been undertaken to the Court is to preserve the properties intact for  being  proceeded  against in a  given  eventuality  and deliver  peaceful possession of the property in the event of such  action becoming necessary.  Declaration or undertaking conceding such liberty of action cannot be construed to fall under  clause (b) of Section 17 (1) of the Registration Act. It is important to note that both the consent decree as well as the undertaking do not, by itself, envisage the execution of  any  deed or document also to create,  declare,  assign, limit  or  extinguish, whether in present or in  future  any right, title or interest whether vested or contingent of the value  of  Rs.100  or upwards in  immovable  property.   The consent  order  as also the undertaking given in  this  case would  squarely  fall within the exempted category  of  ‘any decree or order of the Court envisaged under Section 17 (2) (vi)  and take it outside the excepted category of cases for the  simple reason that it does not deal with, as such,  any immovable  property envisaged in the manner of clause (b) of Section  17  (1)  of  the Registration Act.   In  the  first instance, the decree/order in question does not comprise any immovable  property as such.  In any event, in a matter like the  one before us where the consent order which came to  be passed  on  agreement  as well as the undertaking  given  in pursuance  thereof,  was  an undertaking to the  Court,  the words  subject-matter of the suit need not be confined  to the  subject-matter of the plaint or subject- matter of  the dispute  alone, but would include all that which is made  to become  part  of  the proceedings in order  to  finally  and effectively  settle  all the disputes between  the  parties. Shorn  of all these unnecessary controversies now raised, we are  also  of  the  view that in a case  where  an  item  of property is referred to in an undertaking given to the Court as  one  which can be proceeded against in the event of  the judgment-  debtor failing to pay the decretal amount  within the  stipulated  time, the immovable property does  not  get ipso  facto  affected  or  suffer in anyone  of  the  manner envisaged  under Section 17 (1) so as to require  compulsory registration.

     That  apart,  the provisions contained in Section  145 CPC  also would enure to the benefit of the Court as well as the   Custodian   to  proceed   against  the  appellant   in enforcement  of the undertaking given to the Court and there are  no merits in the contentions sought to be urged to  the contrary.  For all the reasons stated above, we see no merit whatsoever  in  the above appeal.  The appeal  is  dismissed with  costs  quantified  at Rs.25,000/- to be  paid  to  the Custodian.