Wednesday, 25 July 2018

Precaution to be taken by court while granting injunction

Notwithstanding the above and without disclosing the aforesaid facts,
Litesh and Parul have filed Declaratory suits in the Small Causes Court
(Bandra Branch) in collusion with the Valias and have obtained Interim
Orders on 7 March 2017. We have no manner of doubt that the said
Declaratory suits filed in the Small Causes Court (Bandra Branch) are
collusive suits filed by Litesh and Parul on the one hand and Valias on the
other hand and filed merely to obstruct and delay the taking over physical
possession of the said flats which are secured assets of the Petitioner Bank.
We are of the prima-facie view that the said Litesh & Parul on the one hand
and the Valias on the other hand have practiced fraud upon the Small
Causes Court (Bandra Branch). Apart from appropriate action in Contempt,
if any, they would have to satisfy the Court why the impugned order should
not be set aside in these proceedings in view of the judgment in the case of
S.P. Chengal Varaya Naidu (dead) by LRS vs. Jagannath (dead) by LRS,
(1994) 1 SCC 1, wherein it was held:
“Fraud avoids all judicial acts, ecclesiastical or temporal” observed Chief
Justice Edward Coke of England about three centuries ago. 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 of 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.”

9. We have come across such suits dime and dozen times. What however
is disturbing in the present case is the causal manner in which interim
injunctions are granted in both the suits making the provisions of the
SARFAESI Act nugatory. It appears that the interim injunctions are granted
even without reading the prayers in the Application for Interim Relief. The
prayers in the Applications for interim reliefs mischievously incorporate the
words “their creditors” and the interim injunctions in both the Applications in
the two suits are granted in the following terms:
“ORDER
1. …
2. The defendants, their creditors, servants, agents or other disgruntle elements are
hereby restrained by and order of temporary injunction from dispossessing the plaintiff from
the suit premises pending the hearing and final disposal of the suit”
(emphasis supplied)
The ‘creditors’ (the Petitioner Bank in the present case), have for obvious
reasons not been made parties in the Small Causes Court suits and interim
injunctions have been obtained behind their back and without disclosing all
facts, to obstruct and delay the taking over of physical possession of the
said flats which are secured assets of the Petitioner Bank as indicated
earlier. The grant of such blanket injunctions sets at nought the entire object
for which the SARFAESI Act was enacted.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION (ST.) NO. 17974 OF 2018
WITH
WRIT PETITION (ST.) NO. 17978 OF 2018

Central Bank of India V/s. M/s. VHCL Industries Ltd. & Ors.

CORAM : A.A. SAYED AND
V.L. ACHLIYA, JJ.
DATE : 3rd JULY, 2018.



1. Issue notice to Respondent No. 4 in both Petitions, returnable 31 July
2018.
2 Writ Petition (St) No. 17974 of 2018 has been filed by the Petitioner -
Central Bank of India seeking the following relief:
1) That the Hon'ble Court be pleased to issue a Writ of
Certiorari or Writ of in the nature of Cetiorari or any
appropriate Writ or Direction or Order to set aside/quash
the Order dated 7th March 2017 by deleting the word
“Creditor” passed by Hon'ble Judge of Small Causes Cr.
No. 35 in Exhibit 10 in R.A.D. Suit No.120 of 2017.

3 Writ Petition (St) No. 17978 of 2018 has been filed seeking the
following relief:
1) That the Hon'ble Court be pleased to issue a Writ of
Certiorari or Writ of in the nature of Cetiorari or any
appropriate Writ or Direction or Order to set aside/quash
the Order dated 7th March 2017 by deleting the word
“Creditor” passed by Hon'ble Judge of Small Causes Cr.
No. 35 in Exhibit 10 in R.A.D. Suit No.121 of 2017.
4 It is thus seen that both the Writ Petitions are more or less identical
except that since there were two flats in question viz.- flat nos. 61-A and 71-
A, Varsha Apartments, Juhu-Gulmohar Cross Road No..4, JVPD Scheme,
Vile Parle (West), Mumbai-400 049 (hereinafter referred to as ‘the said flats)
of which two separate tenancies are claimed, there were 2 Declaratory suits
filed in the Small Causes Court (Bandra Branch).
5 The said flats are the subject matter of the present Writ Petitions. The
1st Declaratory suit is filed by one Litesh Bhuta (Respondent No. 4 in the 1st
Writ Petition) against Bhushan Pankaj Valia & Daksha Pankaj Valia
(Respondent Nos. 2 & 3 in the 1st Writ Petition), who are the owners of Flat
No. 61-A. The 2nd Declaratory suit is filed by Litesh’s wife - Parul
(Respondent No. 4 in the 2nd Writ Petition) against Pankaj H. Valia and
Daksha Pankaj Valia (Respondent Nos 2 & 3 in the 2nd Writ Petition), who
are the owners of Flat No. 71-A. The said 2 suits are filed by Litesh and

Parul claiming to be tenants of the respective flats which are owned by the
said Valias.
6. The said flats are stated to have been amalgamated and form a single
duplex unit. The said flats as a matter of fact are ‘secured assets’ of the
Petitioner Bank and the original Title Deeds of the said flats are stated to be
with the Petitioner Bank. The Respondent No. 1 Company - VHCL (principal
borrower) was sanctioned Financial assistance to the tune of Rs.32 crores
sometime in June 2012 by the Petitioner Bank. Valias who are the owners of
the said flats stood guarantors and offered the said flats as security for the
creation of equitable mortgage against the grant of the aforementioned
financial assistance.
7. On 24 November 2012, the Society issued an NOC for creation of
equitable mortgage. Valias had also signed Declarations, duly notarised,
dated 13 September 2012 that the said flats are free from all encumbrances,
claims or demands. On 30 April 2014, the account of the Respondent no.1
Company was classified as NPA. The Petitioner Bank has filed an Original
Application before the DRT for recovery of an amount of Rs 44.65 crores as
on 13 January 2016. On 10 July 2015 the Petitioner Bank issued demand
notice under section 13(2) of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(‘SARFAESI Act’ for short). On 27 January 2016 the Petitioner Bank

obtained symbolic possession of the said flats under section 13(4). On 22
February 2017 an order was passed under section 14 of the SARFAESI Act
by the Chief Metropolitan Magistrate to take over possession of the said
flats by appointing a Court Commissioner. When the Court Commissioner
visited the said flats to take physical possession of the said flats, he was
obstructed by Litesh and Parul. It then that it came to light that the said
Litesh and Parul had filed the separate Declaratory suits in the Small
Causes Court (Bandra Branch) as indicated in paragraph 2 above, claiming
to be tenants of the said flats (Litesh claiming to be tenant of Flat No. 61-A
and Parul claiming to be tenant of Flat No. 71-A) and that they had obtained
interim injunction against the Defendants (Valias) and their ‘creditors’ from
dispossessing them from the said flats. They have relied upon separate
unregistered Tenancy Agreements dated 10.03.2012 with Valias as
landlords. It is noted that the Respondent No. 1 Company and Valias have
filed Securitisation Application before DRT in April 2017 and have not been
successful in obtaining any ad-interim/interim reliefs. Interestingly, Litesh
and Parul who claim to be tenants had also filed Applications seeking
intervention before the Chief Metropolitan Magistrate which came to be
rejected by order dated 22.02.2017 on the ground that the remedy of a
person claiming to be a tenant of secured assets was before the DRT in
view of the insertion of section 17(4-A) in the SARFAESI Act by way of
amendment in the year 2016.

8. Notwithstanding the above and without disclosing the aforesaid facts,
Litesh and Parul have filed Declaratory suits in the Small Causes Court
(Bandra Branch) in collusion with the Valias and have obtained Interim
Orders on 7 March 2017. We have no manner of doubt that the said
Declaratory suits filed in the Small Causes Court (Bandra Branch) are
collusive suits filed by Litesh and Parul on the one hand and Valias on the
other hand and filed merely to obstruct and delay the taking over physical
possession of the said flats which are secured assets of the Petitioner Bank.
We are of the prima-facie view that the said Litesh & Parul on the one hand
and the Valias on the other hand have practiced fraud upon the Small
Causes Court (Bandra Branch). Apart from appropriate action in Contempt,
if any, they would have to satisfy the Court why the impugned order should
not be set aside in these proceedings in view of the judgment in the case of
S.P. Chengal Varaya Naidu (dead) by LRS vs. Jagannath (dead) by LRS,
(1994) 1 SCC 1, wherein it was held:
“Fraud avoids all judicial acts, ecclesiastical or temporal” observed Chief
Justice Edward Coke of England about three centuries ago. 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 of 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.”

9. We have come across such suits dime and dozen times. What however
is disturbing in the present case is the causal manner in which interim
injunctions are granted in both the suits making the provisions of the
SARFAESI Act nugatory. It appears that the interim injunctions are granted
even without reading the prayers in the Application for Interim Relief. The
prayers in the Applications for interim reliefs mischievously incorporate the
words “their creditors” and the interim injunctions in both the Applications in
the two suits are granted in the following terms:
“ORDER
1. …
2. The defendants, their creditors, servants, agents or other disgruntle elements are
hereby restrained by and order of temporary injunction from dispossessing the plaintiff from
the suit premises pending the hearing and final disposal of the suit”
(emphasis supplied)
The ‘creditors’ (the Petitioner Bank in the present case), have for obvious
reasons not been made parties in the Small Causes Court suits and interim
injunctions have been obtained behind their back and without disclosing all
facts, to obstruct and delay the taking over of physical possession of the
said flats which are secured assets of the Petitioner Bank as indicated
earlier. The grant of such blanket injunctions sets at nought the entire object
for which the SARFAESI Act was enacted.

10. We are informed that the Petitioner Bank has taken steps to have the
interim injunction orders of the Small Causes Court (Bandra Branch) set
aside. Even so, since we find that this a novel way now being adopted by
unscrupulous borrowers to defeat the rights of the secured creditors, we feel
this mischief needs to be curbed at the earliest.
11. In the circumstances, we deem it appropriate to call a Report from the
Chief Judge, Small Causes Court, Mumbai. The Report to indicate the steps
that can be taken to curb the mischief and to sensitize all the Judicial
Officers of Small Causes Court at Mumbai, to the provisions of the
SARFAESI Act and in particular section 17(4-A) thereof. The Report to also
indicate whether this topic can be taken up for consideration in one of the
workshops, which are held from time to time. Let such Report be submitted
before the next day to the Registrar (Judicial) of this Court.
12 Stand over to 31.07.2018.
(V.L. ACHLIYA, J.) (A.A. SAYED, J.)

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