Central Depository Services (India) Ltd. v. Rajendra Yeshwant Shah and Ors.

16) Mr. Cama would further submit that even if the impugned order is treated as the one passed under the Code in execution, the Code applies to the Act of 1940 only by virtue of Section 41 thereof. That therefore the orders passed in execution proceedings are orders passed under Section 41 of the Act of 1940 and not under the Code. That the provisions of the Code for execution are incorporated in the Act of 1940 by virtue of Section 41 and that therefore every order passed in execution would be an order passed under Section 41 and not under the general law of the Code. In support, he would rely upon judgment of the Delhi High Court in Union of India and Ors. Versus. N. K. Pvt. Ltd. and Anr[9]. He would rely upon judgment of the Apex Court in Union of India and others Versus. Aradhana Trading Co. and others10 in support of his contention that every order passed even after conversion of award into decree is still referable to Section 41 of the Act of 1940 and that therefore Appeal can be filed only if such order is appealable under Section 39.

17) On the merits of the impugned order, Mr. Cama would submit that the learned Single Judge has exercised discretion while passing a detailed and exhaustive order after considering all the material on record and in absence of an element of perversity, this Court would not be justified in interfering with the same.

Reliance is placed on judgment of the Apex Court in Wander Ltd. and another Versus. Antox India P. Ltd.11. He would further submit that CDSL and Amu cannot seek to escape the consequences of their conduct in actively aiding transfer of shares from the account of ABG Securities under the pretext of CDSL not being party to the proceedings and absence of any specific order being passed against Amu. Amu was impleaded as a party to the Chamber Summons in which ad-interim injunction was granted and it had full knowledge about the same. That Amu still violated the adinterim injunction by letting sale of shares in the account of ABG Securities. That the learned Single Judge, after considering the material on record, has recorded a finding that Amu is actually a front for Ashok Bimal Ghosh/his legal heirs. That therefore the act of sale of shares is done by Amu in connivance with Ashok Bimal Ghosh/his legal heirs. That to make things worse, the transactions indicate that Amu has sold the shares to itself. That therefore the detailed analysis made by the learned Single Judge holding Amu responsible for siphoning off shares in breach of order of injunction does not warrant any interference by this Court.

18) Mr. Cama would further submit that the learned Single Judge, after appreciating the material on record, has arrived at a finding that both CDSL as well as Amu have knowingly and willfully acted in breach of an order of injunction passed by this Court. That the Courts have followed consistent judicial policy of reversion of status-quo after arriving at a finding that there is willful breach of order of injunction. That merely because such 11 1990 (Supp) SCC 727 breach is committed by a third party is not an answer and technical arguments cannot be permitted to be raised for the purpose of avoiding consequences arising out of breach of injunction order. That there was no other way to bring back the shares siphoned off and therefore the learned Single Judge has rightly directed maintenance of status-quo ante by making an order for deposit of amount of Rs.1.79 crores. That though Respondent Nos.[1] to 3 could also have taken out contempt proceedings, the same would provide no relief to them and that therefore the order of deposit of money has rightly been made by the learned Single Judge. That as of now, the direction only envisages bringing the money to the Court and entitlement of the parties to the same would ultimately be decided in pending execution proceedings. That CDSL is otherwise under obligation under its bye-laws to obey the injunction order. That CDSL’S bye-laws provide for obligation to recover the monies from depository participants if there is a breach of injunction order giving rise to liability on the CDSL.

19) Mr. Cama would then deal with the defence sought to be raised by CDSL of its inability to search the exact amount of ABG Securities by taking us through the entire correspondence between the parties. He would submit that there is an express admission on the part of CDSL that it was able to search the relevant accounts of ABG Securities and Ashok Bimal Ghosh on the basis of their address. That therefore searching of accounts was easily possible before the shares were transferred. That therefore CDSL is fully responsible for breach of order of injunction passed by this Court as it has willfully failed to comply with the same.

20) So far as liability of Amu is concerned, Mr. Cama would submit that it had never set up a case of holding any lien over the shares of ABG Securities and the said pretext was set up only at the time of hearing of the Chamber Summons. That an artificial liability of ABG Securities was created for the purpose of selling of shares in breach of ad-interim injunction. That Amu has refused to grant inspection of the relevant records. That the Court has therefore rightly refused to believe the case of existence of lien. He would rely on the judgment in Z. Ltd. Versus. A-Z and AA-LL12 in support of the contention that even a third party breaching injunction can be held liable. On above broad submissions, Mr. Cama would pray for dismissal of both the Appeals. Reasons and Analysis 21) The Appeals are filed under Clause XV of the Letters Patent challenging the order dated 9 January 2019 passed by Single Judge of this Court in Chamber Summons filed in Execution proceedings. Respondent Nos. 1 to 3 have questioned maintainability of the present appeals on the ground that the order dated 9 January 2019 is not included in the list of appealable orders under Section 39 of the Act of 1940. It would therefore be necessary to first deal with the issue of maintainability of the present appeals. 12 [1982] 1 Lloyd’s Rep. 240 Maintainability of Appeals under Clause XV of the Letters Patent

22) Respondent Nos. 1 to 3 have filed Execution Application No. 329 of 1997 for execution of the decree made in pursuance of the award dated 16 January 1997 under provisions of Section 17 of the Act of 1940.

23) Section 17 of the Act of 1940 provides for pronouncement of judgment according to the award, and judgment so pronounced becomes a decree. Section 17 of the Act of 1940 provides thus:

17. Judgment in terms of award.- Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award.

24) In the present case, after the award was made on 16 January 1997, the same was challenged by Ashok Bimal Ghosh under Section 30 of the Act of 1940 by filing Arbitration Petition No. 127 of 1997. On the other hand, Arbitration Petition No. 112 of 1997 was filed by the Claimant under Section 17 of the Act for pronouncement of judgment. By order dated 29 September 1997, this Court dismissed Arbitration Petition No. 127 of 1997 filed by Ashok Bimal Ghosh and confirmed the award as a decree by ordering Ashok Bimal Ghosh to pay sum of Rs. 3,58,29,000/- with interest at the rate of 18% per annum. This is how a judgment was pronounced in terms of the award dated 16 January 1997, which became a decree under provisions of Section 17 of the Act of 1940.

25) The Act of 1940 did not contain any specific provision for enforcement of the arbitral award. Therefore, the decree made in accordance with provisions of Section 17 of the Act of 1940 became executable before the Execution Court. Respondent Nos. 1 to 3 accordingly filed Execution Application No. 329 of 1997 for execution of the decree dated 29 September 1997 made under provisions of Section 17 of the Act of 1940. In that Execution Application, Chamber Summons No. 534 of 2005 was filed, in which ad-interim injunction was granted on 6 May 2005 restraining Respondent Nos. 1, 3 to 6 therein from transferring, selling, alienating and encumbering inter alia the shares described in Schedule VIII in the physical and Demat forms with NSDL and CDSL in the name of Respondent Nos. 1, 3 to 6. Since shares in the account of ABG Securities were transferred after passing of adinterim injunction dated 6 May 2005, Chamber Summons No. 55 of 2009 was filed by Respondent Nos. 1 to 3 seeking a direction either for bringing back the transferred shares or to deposit in the Court the value of the transferred shares. The impugned order dated 9 January 2019 has been passed in Chamber Summons No. 55 of

2009.

26) The issue of maintainability of the present appeals needs to be decided in the light of controversy as to whether the impugned order is passed in execution proceedings filed under the Code or in proceedings filed under the Act of 1940. Resolution of this controversy is necessary on account of provisions of Section 39 of the Act of 1940, which provides for filing an appeal only against orders enumerated in that Section. Section 39 of the Act of 1940 provides thus:

39. Appealable orders: (1) An appeal shall lie from the following orders passed under this Act (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order:- An order –

(i) superseding an arbitration;

(ii) on an award stated in the form of a special case;

(iii) modifying or correcting an award;

(iv) filing or refusing to file an arbitration agreement;

(v) staying or refusing to stay legal proceedings where there is an arbitration agreement;

(vi) setting aside or refusing to set aside an award:

Provided that the provisions of this section shall not apply to any order passed by a Small Cause Court. (2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

27) According to the Respondent Nos. 1 to 3, the impugned order dated 9 January 2019 cannot be treated as an order passed in proceedings initiated under the Code. On the other hand, it is the contention of the Appellants that the impugned order has been passed in execution proceedings filed under Section 47 read with Order XXI of the Court and that therefore Appeal under Clause XV of the Letters Patent is maintainable. Before proceeding further, it would be necessary to observe that at the outset that Respondent Nos. 1 to 3 do not dispute the position that if the impugned order dated 9 January 2019 is treated to be have been passed under the provisions of the Code alone, appeal under provisions of Clause XV of the Letters Patent would be maintainable in view of judgment of the Apex Court in Shah Babulal Khimji (supra). In that judgment, the Apex Court has held that every interlocutory order which has the traits and trappings of ‘finality’ would be appellable under Clause XV of the Letters Patent, notwithstanding whether such order is appealable under Order XLIII Rule 1 or not. Qua the issue of restoration of status quo, the impugned order has the traits and trapping of ‘finality’ and therefore if the Order is held to have been passed under the provisions of the Code, the Appeals would be maintainable. However, since the impugned order is held to have been passed under the Act of 1940, since the same is not appealable under Section 39 thereof, the Appeals would become non-maintainable. In the light of this position, the only issue that needs resolution is whether the impugned order is passed under the provisions of the Act of 1940 or under the provisions of the Code.

28) In support of the contention that the impugned order has been passed under the provisions of the Act of 1940, reliance is placed by Respondent Nos. 1 to 3 on provisions of Section 41 thereof which provides thus:-

41. Procedure and powers of Court: Subject to the provisions of this Act and of rules made there under - (a) the provisions of Code of Civil Procedure, 1908 (5 of 1908) shall apply to all proceedings before the Court, and to all appeals, under this Act, and (b) the Court shall have, for the purpose of, and in relation to, arbitration proceedings, the same power of making orders in respect of any of the matters set out in the Second Schedule as it has for the purpose of, and in relation to, any proceedings before the Court: Provided that nothing in clause (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire for making orders with respect to any of such matters.

29) Thus, under Section 41 of the Act of 1940, the provisions of the Code apply to all proceedings before the Court and to all appeals under the Act. It is therefore contended on behalf of the award holders that an award made under the provisions of the Act of 1940 can be enforced by filing proceedings in accordance with provisions of Section 41 of the Act.

30) As observed above, the Act of 1940 does not contain any specific provision for enforcement or execution of the award. The award becomes a judgment and decree under provisions of Section 17 of the Act of 1940, which then becomes executable. It is the contention of Respondent Nos. 1 to 3 that the proceedings filed for execution of decree made in terms of Section 17 of the Act of 1940 is also a proceeding within the meaning of Section 41 of the Act of 1940.

31) For deciding the issue at hand, it would also be necessary to take into consideration the scheme under the Act of 1996, which has replaced the Act of 1940. Under the Act of 1996, an award made thereunder has an independent character and status and the same is not required to be converted into a judgment or decree. This is why the Act of 1996 does not contain any provision for pronouncement of judgment or making of a decree by a Court in pursuance of the award, as was the case under Section 17 of the Act of 1940. On the other hand, the Act of 1996 makes a direct provision for enforcement of the award under Section 36, which provides thus:

36. Enforcement.— (1) Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were a decree of the Court. (2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose. (3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing: Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908): Provided further that where the Court is satisfied that a prima facie case is made out (a) that the arbitration agreement or contract which is the basis of the award; or (b) the making of the award, was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award. Explanation.- For the removal of doubts it is hereby clarified that the above proviso shall apply to all Court cases arising out of or in relation to arbitral proceedings irrespective of whether the arbitral or court proceedings were commenced prior to or after the commencement of Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016).

32) Thus, the statutory scheme of 1996 Act is such that an award made by the Arbitrator can be directly enforced by filing proceedings under Section 36 of the said Act. Section 36 thus confers a substantive remedy for the enforcement of an award in the Act of 1996 at itself.

33) Section 36 of the Act of 1996 creates a deeming fiction by providing for the enforcement of an award in accordance with the provisions of the Code, in the same manner as if it were a decree of the Court. Thus, the award does not become a decree under Section 36 of the Act of 1996, but is to be merely treated as a decree for the limited purpose of enforcement in accordance with provisions of the Code.

34) There is, thus, a marked difference between the schemes of the Act of 1940 and the Act of 1996 with respect to the status and character of the award, for its enforcement. An award becomes a decree under Section 17 of the Act whereas under the Act of 1996, the award never assumes character of a decree and continues to retain its independent character and status as an award. To paraphrase, under the Act of 1940, an award loses its character as an award and transforms into a decree upon passing an order under Section 17 whereas under the Act of 1996, an award never loses its character or status and continues to remain as an award, even when it is sought to be enforced under Section

36.

35) This broad distinction between the statutory schemes of 1940 Act and 1996 Act has been dealt with by a Division Bench of this Court in Jet Airways (India) Limited (supra) in which the issue for determination was formulated in paragraph 9 of the judgment as under:

9. It is necessary to decide whether the impugned order passed by the Learned Single Judge is an order passed in proceedings under section 36 of the Arbitration and Conciliation Act, 1996 or an order passed in proceedings under the Code of Civil Procedure, 1908. For determining the question about maintainability of these Appeals in proper perspective, we deem it fit to note certain relevant provisions of the Arbitration and Conciliation Act, 1996 (1996 Act), Letters Patent of the High Court, Bombay, Code of Civil Procedure, 1908, and Arbitration Act 1940 (the 1940 Act).

36) The Division Bench thereafter formulated further three core issues in paragraph 15 of the judgment as under:

15. For considering whether the aforesaid submissions deserve acceptance or not 3 core issues have to be determined namely-

Fuerst Day Lawson (supra) is an authority which is applicable only in respect of a foreign award covered by Part II of the 1996 Act or whether the ratio of the said Judgment is a binding precedent even in respect of proceedings under part I of the 1996 Act or the same is obiter dicta?

37) The Division Bench thereafter decided the issue of nature of proceedings under Section 36 of the Act of 1996 by comparing the provisions of the Act of 1940 and held as under:

(a) Section 36 of the 1996 Act uses the words "the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a Decree of a court." In fact section 17 of the 1940 Act does not make an arbitration award a decree of the court even though Chapter II of the said Act dealt with the arbitration without intervention of a court. Section 30 of 1940 Act provides for filing a petition for setting aside an award and in that context section 17 provided that when the time for filing a petition under section 30 of that Act had expired or when the petition filed for setting aside the award has been dismissed, the court shall proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall fallow. Thus the 1940 Act clearly provided for a decree being passed by the Court. There is fundamental difference in the provisions of section 36 of the 1996 Act and section 17 of the 1940 Act only in this regard. (b) The words "as if it were a decree of the court" used in section 36 have already been interpreted by the Supreme Court in Paramjeet Singh Patheja vs. ICDS Ltd. MANU/SC/4798/2006: (2006) 13 SCC

322. In that case, an award under 1996 Act was passed on 26/6/2000 and on the strength of the said award an insolvency notice was issued under section 9(2) of the Presidency Towns Insolvency Act, 1909. Section 9(2) of the said 1909 Act provides that a debtor commits an act of insolvency if a creditor who has obtained a "decree or order" against him for the payment of money issues him a notice in the prescribed form to pay the amount and the debtor fails to do so within the time specified in the notice. This issue was referred to a Division Bench. The Division Bench answered the reference in the affirmative on 19.03.2003 and held that an award is a "decree" for the purpose of section 9 of the Insolvency Act and that an insolvency notice may therefore be issued on the basis of an award passed by an arbitrator. Against this order this order the SLP was filed. In this context the observations of the Supreme Court in paragraph-12 read thus:

The aforesaid provision would show that an award is to be enforced in accordance with the provisions of the said code in the same manner as if it were a decree. It is, thus, the enforcement mechanism, which is akin to the enforcement of a decree but the award itself is not a decree of the civil court as no decree whatsoever is passed by the civil court. It is the arbitral tribunal, which renders an award and the tribunal does not have the power of execution of a decree. For the purposes of execution of a decree the award is to be enforced in the same manner as if it was a decree under the said Code.

19. The Madras High Court in Kotak Mahindra Bank Ltd. v. Sivakama Sundari, 2011 SCC Online Mad 1290 referred to Section 46 of the said Code, which spoke of precepts but stopped at that. In the context of the Code, thus, the view adopted is that the decree of a civil court is liable to be executed primarily by the Court, which passes the decree where an execution application has to be filed at the first instance. An award under Section 36 of the said Act, is equated to a decree of the Court for the purposes of execution and only for that purpose. Thus, it was rightly observed that while an award passed by the arbitral tribunal is deemed to be a decree under Section 36 of the said Act, there was no deeming fiction anywhere to hold that the Court within whose jurisdiction the arbitral award was passed should be taken to be the Court, which passed the decree. The said Act actually transcends all territorial barriers. Thus, the Apex Court, after noticing the provisions of Section 36 of the Act of 1996 has held that Section 36 only creates enforcement mechanism which is akin to enforcement of a decree, but the Award itself is not a decree of Civil Court. It has further held that Award under Section 36 of the Act is equated to a decree of the Court for the purposes of execution and only for that purpose. It is otherwise not a decree for any other purposes. The Apex Court recognised the principle that Section 36 creates a legal fiction by providing for enforcement of award as if it is a decree.

45) Mr. Cama has strenuously relied on the judgment in Union of India Versus. Aradhana Trading Co. (supra), in which the issue before the Apex Court was about the maintainability of an appeal under Section 39 of the Act of 1940, against an order made by the Court under Order IX Rule 13 of the Code, refusing to recall an ex-parte order passed under Section 17 of the Act of 1940. In that case, after making of an award, the same was filed by the Arbitrator before the Calcutta High Court, which issued notices to the Appellants. Appellants failed to file any objections against the award. In absence of appearance on behalf of the Appellants, the High Court passed a decree in terms of award under Section 17, making the same rule of the Court. Appellant thereafter moved an application for recall of an order passed under Section 17 to explain its absence. The said application was filed under provisions of Order IX Rule 13 of the Code which was dismissed by the learned Single Judge of the High Court. Against that order, appeal was preferred before the Division Bench under provisions of Section 39 of the Act of 1940. The appeal was dismissed by the Division Bench as not maintainable. In the light of this position, the issue before the Apex Court was whether an appeal against order passed by a Single Judge refusing to set aside ex-parte order under Order IX Rule 13 of the Code was appealable under Section 39 of the Act of 1940. The Apex Court referred to its decision in Union of India Versus. Mohindra Supply Co. (supra) and held as under:

9. …. In Union of India Vs Mohindra Supply Company MANU/SC/0004/1961: [1962]3SCR497: [1962]3SCR497, a decision by a Bench of Four Judges, held that Section 39 applies to the appeals to superior courts as well as to intra-court against the decree passed in terms of the award but against the order passed in appeal, a Letters Patent Appeal was held to be barred under sub-section (2) of Section 39 of the Arbitration Act according to which no second appeal lies against an order passed under Section 39(1) of the Act. It was further held that in view of the said provision, appeal under Section 100 CPC was also prohibited. We, however, find that so far as this case is concerned, it stands on a different footing since in the present case it is not a further appeal or a second appeal but an appeal against an order passed by the learned Single Judge under Order IX Rule 13 CPC. It would however be relevant for the purpose that restriction on appeal under Section 39 of Arbitration Act shall be applicable to appeals under any provision of law, may be CPC or Letters Patent.

13. The question which thus remains to be considered is as to whether an order passed on an application making the prayer like one which could be referable to Order IX, Rule 13 CPC would be appealable or not. Such an application could be made by virtue of Section 41 of the Arbitration Act. An order under Order IX, Rule 13 CPC is appealable under Order 43, clause (c) read with Section 104 CPC. In the case of National Sewing Thread Co. Ltd. (supra), a decision by a Bench of Three Hon'ble Judges, the matter related to Trade Marks Act Section 76(1) of which provided for an appeal against a decision of the regard to the procedure to be applied was made. An appeal against the order of the Registrar was decided by a learned Single Judge of the High Court against which a Letters Patent Appeal was filed which was held to be maintainable even though no such provision of further appeal was made under the Trade Marks Act. As indicated earlier the Court in the above-noted case has relied upon certain decision and held as follows: "Though the facts of the cases laying down the above rule were not exactly similar to the facts of the present case, the principle enunciated therein is one of general application and has an apposite application to the facts and circumstances of the present case. Section 76 the Trade Marks Act confers a right of appeal to the High Court and says nothing more about it. That being so, the High Court being seized at such of the appellate jurisdiction conferred by section 76 it has to exercise jurisdiction in the same manner as it exercises its other appellate jurisdiction and when such jurisdiction is exercised by a Single Judge, his judgment becomes subject to appeal under clause 15 of the Letters Patent there being nothing to the contrary in the Trade Marks Act." In view of what has been held above a Court while exercising power by virtue of Section 41 of the Arbitration Act shall have all other related powers of the ordinary civil court subject to the constraints contained in the special Act itself. Normally, an appeal would be maintainable but there are two constrains as provided under the Special Act, namely, it should not be a second appeal as provided under sub-section (2) of Section 39 of the Act which position is also clear in the case of Mohindra Supply Company (supra) where it was held that the second appeal under Section 100 CPC or under the Letters Patent against an appellate order was barred by virtue of subsection (2) of Section 39. Here we find that there is yet another constraint as provided under sub- section (1) of Section 39 of the Arbitration Act itself and it is emphatic too when it says that appeal shall lie against the orders indicated in the provision and from no other order. Section 41 of the Arbitration Act makes the provisions of CPC applicable subject to the provisions of the Arbitration Act and the rules framed thereunder. Therefore, the nature of an order against which an appeal may lie must conform to the nature of the order as enumerated under sub-section (1) of Section 39 of the Arbitration Act. If it does not amount to such an order as enumerated under subsection (1) of Section 39, the prohibition as contained in this subsection "(against no other order") itself, would become operative, subject to which alone provisions of CPC apply under Section 41 of the Act. In the facts of the present case we find that an order refusing to recall an order passed by the court will not amount to refusal to set aside the award under clause (vi) of sub-section (1) of Section 39 of the Arbitration Act as no objections to set aside the award have ever been filed with or without application for condonation of delay, challenging the award. Admittedly, the appellant did not file any appeal against the order dated 27.1.1998. In these circumstances and in view of the provisions of the Arbitration Act, the decision in the case of National Sewing Thread Co. Ltd. (supra) shall also not be applicable as in the Trade Marks Act with which the court was dealing, did not have any provision like the one contained in sub- section (1) of Section 39 of the Arbitration Act restricting the right of appeal only in respect of certain nature of orders and prohibiting appeal against any other order whatsoever. Therefore, in the case of National Sewing Thread Co. Ltd. (supra) it was held that where a provision for appeal was made under Section 76(1) of the Trade Marks Act to the High Court, with nothing more, the other provisions relating to exercise of that jurisdiction by the High Court would be applicable. The case of National Sewing Thread Co. Ltd. (supra) is thus based on different provisions and is clearly distinguishable. The case in hand is covered by the decisions in the cases of Neeilkantha (supra) and Mohindra Supply Co. both decided by Bench of four Judges which do not seem to have been noticed in other judgments.

46) In our view, the judgment of the Apex Court in Aradhana Trading Co. offers little assistance to the issue involved in the present case. The issue before the Apex Court was about maintainability of an appeal under Section 39 of the Act of 1940, against an order passed in application seeking recall of an ex-parte decree. Thus, what was sought by the Appellant was recall of an order made under Section 17 of the Act of 1940. In that sense, the proceedings had not traveled beyond the scope of the Act of 1940 and remained within its sphere. If the learned Single Judge was to allow the application for recall of the ex-parte order, proceedings under Section 17 of the Act would have revived. Thus, the application filed by the appellants was for revival of proceedings under Section 17 of the Act and therefore even though provisions of Order IX Rule 13 of the Code were sought to be invoked, the order made in that application still remained within the purview of proceedings under the Act of 1940. Since the said order was not appealable under Section 39 of the Act, the appeal was held to be not maintainable. In the present case, an application filed by Respondent Nos. 1 to 3 is after the Section 17 stage is crossed and the proceedings have traveled outside the scope of the Act of 1940. In our view, therefore, the judgment of the Apex Court in Aradhana Trading Co. would have no application to the issue involved at hand.

47) Mr. Cama has contended that the Act of 1940 is a complete code in itself and that therefore every order made relating to an award including execution proceedings, would be proceeded under the Act of 1940 and not under the provisions of the Code. Reliance is placed on the judgment of the Apex Court in Union of India Versus. Mohindra Supply Co. (supra) in which it is held as under: The Arbitration Act which is consolidating and amending act, being substantially in the form of a quote relating to arbitration must be construed without any assumption that it was not intended to alter the law relating to appeals.

48) The above observations are made in the light of facts of the case in which a Second Appeal was sought to be filed against order passed by a Single Judge of the High Court under provisions of Section 39 of the Act of 1940, dismissing an appeal challenging the order of the Subordinate Judge, First Class, Delhi, refusing to set aside the award. The issue before the Apex Court was whether a Second Appeal was maintainable under the Act of 1940 against an order made under Section 39 of the Act. It is in the light of this issue that the above quoted observations are made. The judgment in Mohindra Supply Co. therefore does not provide any assistance for deciding the issue at hand.

49) Mr. Cama has also relied upon the judgment of the Apex Court in Fuerst Day Lawson Limited (supra) in which it is held that an order which is not appealable under the Act of 1996 are not open to Letters Patent Appeal. There can be no debate about this position that if the impugned order was to be passed in proceedings under the Act of 1940 and was not appealable under Section 39, the present appeals would not have been made maintainable under Clause XV of the Letters Patent. However, since the impugned order is passed in proceedings filed under the provisions of the Code, the appeals would be maintainable under Clause XV of the Letters Patent.

50) Reliance is placed by Mr. Cama on the judgment of Delhi High Court in Union of India Versus. N. K. Pvt. Ltd. (supra) in which again the issue involved was about maintainability of an appeal under the Letters Patent against an order passed in proceedings under the Act of 1940, which otherwise are not appealable under Section 39 of the Act. The judgment therefore provides no assistance for deciding the issue at hand.

51) The conspectus of the above discussion is that the proceedings for execution of a decree made under Section 17 of the Act of 1940 are traceable to the provisions of Section 47 read with Order XXI of the Code and the same are not proceedings under the Act of 1940. Thus, any order passed in those proceedings would be an order made under the Code. Therefore, provisions of Section 39 of the Act of 1940 would not be applicable to such an order. If the order passed in proceedings filed under the Code have the traits and trappings of finality an appeal under provisions of Clause XV of Letters Patent would lie before a Division Bench of this Court.

52) Since the impugned order dated 9 January 2019 has been passed in proceedings filed for execution of a decree made under Section 17 of the Act of 1940, the same will have to be treated as an order passed in proceedings filed under the Code. As the said order has the traits and trappings of final adjudication on the Appellants’ liability to restore status quo, the present appeals filed under Clause XV of the Letters Patent are held to be maintainable. Merits of the Appeals 53) Appellant-CDSL, has contended that it has never been a party to any of the proceedings initiated either by the original claimant or by his legal heirs. There is no dispute to the position that CDSL was not a party to the arbitral proceedings. It is not impleaded as a party even in Execution Application No. 329 of

1997. It is not the case of Respondent Nos. 1 to 3 that the decree made in terms of the arbitral award is executable against CDSL. CDSL was not even impleaded in Chamber Summons No. 534 of 2005, in which an order of ad-interim injunction dated 6 May 2005 was passed. CDSL was impleaded for the first time by Respondent Nos. 1 to 3 in Chamber Summons No. 55 of 2009. On the other hand, Amu was impleaded as a Respondent in Chamber Summons No. 534 of 2005.

54) It would be necessary to refer to the ad-interim injunction order passed by the learned Single Judge on 6 May 2005 in Chamber Summons No. 534 of 2005. The order reads thus:- Put up for further orders on 13th June,2005. Ad-interim order in terms of prayer clause (h). It is clarified that so far as Schedule VI is concerned, this order operates only in relation to the accounts at Item nos.3, 4 and 5 of Schedule VI. It is further clarified that this order does not extend to the d-mat account of Respondent no.2 mentioned in Schedule VIII. Ad-interim order in terms of prayer clause (j).

55) Prayer Clauses (h) and (j) of Chamber Summons NO. 534 of 2005 were as under:- (h) that Respondent Nos. 1, 3 to 6 are their servants, agents/aliases be directed by an Order and injunction of this Hon’ble Court restraining them from transferring, selling, alienating, encumbering any property of Respondent Nos. 1, 3 to 6 or from Creating any third party rights in any of the properties and assets of Respondent Nos. 1 to 6 including those shown in Schedule IV to VIII hereto; (j) that Respondent Nos. 1 be directed by an Order and injunction of this Hon’ble Court restraining him from transferring, selling, alienating, encumbering or creating any third party rights in Respondent No.1’s flat No.105 "C" Wing, Jhaveri Complex Co-op Housing Society Ltd, 123/124 Bhabhola Chulna Road, Vasai (W), Dist. Thane, Maharashtra;

56) Schedule No. VI to the Chamber Summons was as under:-

SCHEDULE – VI HDFC Bank Ltd. Fort Branch, Manekji Wadia Bldg., Nanik Motwani Marg, Mumbai 400 001. Sr. No. Account Name Account No. Recent to 15.01.2005) (Rs.) Authorised Signatories Account Opening Date Customer ID

1. Lily A. Ghosh 0601330009355.00 1. Lily A.

2. Ashok B.

2. Lily A. Ghosh 0601330014759 4,051.92 1. Lily A. 24.03.2003 4075865

3. Ashok B. Ghosh 0601000156019.00 1. Lily A.

4. LANS Communication (sole proprietorship of Ashok B. Ghosh) 0602000026744 10,000.00 1. Ashok B. 21.02.2004 5538638

5. ABG Securities Pvt. Limited 0600340013566 1,30,699.82 (Company formed on 12.02.2004)

57) Thus, order dated 6 May 2005 restrained Ashok Bimal Ghosh, ABG Securities, Lans Communication, Ashok Film and Finance and Lily Agro Products (Respondent Nos. 1 and 3 to 6) in Chamber Summons No. 534 of 2005 from transferring, selling, alienating or encumbering the shares in the accounts reflected in Schedule VI. Item 5 of the Schedule VI was in respect of the Demat Account of ABG Securities. Amu was impleaded as Respondent No. 9 to Chamber Summons No. 534 of 2005, however, the adinterim injunction dated 6 May 2005 did not apply to Amu. In breach of the injunction order dated 6 May 2005, it appears that the shares in the Demat Account of ABG Securities were transferred. It is on this basis that Respondent Nos. 1 to 3 have alleged violation of the injunction and accordingly filed Chamber Summons No. 55 of 2009. In that Chamber Summons, prayer clauses (a) and (f)(i) read thus: (a) That Respondent Nos. 1 and 7 or such of them as this Hon'ble Court holds liable be ordered and directed to

(i) deposit with Mr. Amol V Doijode, Receiver, within a period of four weeks, in his Demat Account, DPID No. IN300685 Client ID 10536714, all the shares transferred out of the Demat Account of Respondent No. 9, DPID 12016200, Client ID 00000785, after the passing of the Injunction Order on May 6, 2005 in Ch/s. 534/2005 Particulars whereof are at Schedule “V”hereto together with all the benefits thereon interalia, bonus shares, split shares, rights shares, dividends etc., issued by the Companies after the date of transfer; OR

(ii) in the alternate to (a)(i) above, handover to Mr. Amol V.

Doijode, Receiver within a period of four weeks, the monetary value of the said shares which were transferred after the passing of the Injunction Order on May 6, 2005 in Ch/s. 534/2005, Rs. 470,25,060.12, along with interest thereon @ 18% p.a. from September 20, 2007, till payment or realization as per the particulars of the claim shown in Schedule “VI" hereto; (f) Respondent No. 7 be directed to:

(i) transfer and deposit with Mr. Amol V Doijode, Receiver, in his Demat Account, DPID No IN300685, Client ID 10536714, within a period of two weeks, all the shares lying in the demat account of Late Ashok Bimal Ghosh being DPID 12016200 Client ID 00000504, as of May 6, 2005, together with all the benefits thereon, interalia, bonus shares and split shares, issued by the Companies thereon;

58) The learned Single Judge in the impugned order dated 9 January 2019 has held both CDSL as well as Amu responsible for the breach of the order of ad-interim injunction and has accordingly made Chamber Summons No. 55 of 2009 absolute in terms of prayer clause (a)(ii) for the amount of Rs. 1,79,62,131.56/as well as in terms of prayer clause f(i). Both CDSL as well as Amu have challenged the order dated 9 January 2019 contending that they were neither bound by the order of ad-interim injunction nor have they violated the same and that therefore the learned Single Judge could not have made an order directing them to bring to the Court an amount of Rs. 1,79,62,131.56/-.

59) We first proceed to examine the challenge raised by the CDSL to the impugned order dated 9 January 2019. CDSL’s Appeal No.104 of 2019 60) CDSL is one of the two depositories in India, the other being National Securities Depository Limited (NSDL). CDSL claims that it has 581 Depository Participants, which include several banks. According to CDSL, there are 16.11 crore Demat account holders for 581 Depository Participants. CDSL, thus sits at the top of the pyramid, whose base is in excess of 16 crore Demat accounts.

61) As observed above, CDSL has never been a party to any of the proceedings up to filing of Chamber Summons No. 55 of 2009. The decree made in pursuance to the arbitral award is neither binding nor executable against CDSL. CDSL is a complete stranger to the transaction between the contesting parties and has been drawn in the proceedings on account of allegation of breach of order of ad-interim injunction dated 6 May 2005 by transfer of shares from the Demat account of ABG Securities. Respondent Nos. 1 to 3 believe that CDSL has participated in breach of adinterim injunction dated 6 May 2005, which is a reason why it was sought to be made liable for bringing back the amount of Rs. 1,79,62,131.56/-. CDSL had raised following submissions before the learned Single Judge, which are captured in paragraph 26 of the impugned order:

26. Mr. Purohit submitted that: (A) Applicants are seeking to execute the decree against CDSL; (B) Section 47 of the Code of Civil Procedure, 1908 (CPC) governs the application, and cannot apply to CDSL;

(C) Order XXI of CPC only provides for payment in three situations none of which is contemplated in the present chamber summons, and there is no provision in CPC for passing an order against CDSL to restore the status quo ante;

(D) CDSL could not freeze the account of ABG as there was no specific order against CDSL; the injunction was in personam against Ghosh, Lily and ABG; (E) There is no obligation on CDSL, in law, to freeze the account; CDSL may choose to do so but it is their entitlement entirely; (F) CDSL could not locate the account of ABG in its system as it was written as “ABG Securities Pvt. Ltd.” and in their system it was recorded as “ABG Securities Private Limited”; (G) CDSL is an innocent third party and the present Application effectively seeks damages against CDSL which cannot be done by way of the present proceedings.

62) The learned Single Judge has, however, rejected CDSL’s contention that it is impermissible to execute the decree against CDSL and that in absence of a provision in the Code, to make an order against CDSL to restore status quo ante by invoking the inherent power under Section 151 of the Code. The learned Single Judge has held that the Court has inherent powers under Section 151 of the Code to restore things to the former condition if a party has acted in breach of an injunction. The learned Single Judge relied upon the judgments in Municipal Corporation, Shirdi Versus. Sau. Sonia Devidas Patil13 and Vidya Charan Shukla Versus. and held in paragraph Nos. 28, 29, 30 and 31 as under:

28 These contentions of Shri Purohit in my view are misconceived as applicants are not seeking, by prayer clause (a), to execute the decree against CDSL or to ask CDSL to pay money to applicants. Applicants are simply seeking an order from this Court that the transfers having been permitted to be done by CDSL in breach of the orders of the Court and in violation of the statutory provisions, Byelaws and Agreement between CDSL and Amu having statutory force, this Court, in exercise of its inherent powers, as per the law laid down in the various judgments referred to and relied upon by Shri Cama, ought to undo the wrong and restore the parties to the position that they were prior to the order of injunction. Applicants are not seeking any orders of execution of the decree against CDSL but are simply seeking consequential orders to bring back the shares sold/transferred in breach of the said order and 13 2009 (2) ALL MR 847 14 AIR 1991 Mad 323 (Full Bench) thereby restore the parties to the position they were in, prior to the transfers being done in breach of said order.

29 The entire contention of Shri Purohit that Section 47 of CPC governs the application and cannot apply to CSDL proceeds on the incorrect basis that the order seeking restoration of the status quo ante falls under Section 47 of CPC. As held in various judgments as referred earlier, this Court has an inherent power, regardless of any other provisions in law, to restore things to their former condition if a party has acted in breach of an injunction. This is both under Section 151 of CPC and also as a matter of judicial policy. A party may not even take out a Contempt Petition or resort to any other provision of law; the Court which passed the order ought to simply exercise its inherent power to ensure that its order is not stultified or set at naught. Judgments referred to above and particularly those of Municipal Council Shirdi (Supra) and Vidhya Charan Shukla (Supra) clarify the above position. Paragraph 12 of the Municipal Council Shirdi (Supra) reads as under:

12. The pleading of the party has to be considered and understood in its proper perspective. This Court and Supreme Court has held that mofussil pleading has to be construed liberally. Para 6 (B) of the prayer clause specifically makes a prayer that if defendants no.1 to 3 succeed in carrying out the construction of the road legally, in that circumstances said work (construction of the road) and said action should be removed and plaintiff be permitted to enjoy the property peacefully. This pleading is in vernacular. I read the plaint from para (1) till last prayer in para 6(C). If the plaint as a whole is read and appreciated, in my view, adequate and sufficient pleading is made by the plaintiff seeking mandatory injunction and/or direction. In the case in hand, both the Courts are concurrent on the point that temporary injunction was issued by the Court. The Courts have referred to various dates right from the date of filing of the suit and even couple of months before it. The Courts have referred the report of the Commissioner. The Courts have also appreciated the short span of time within which the defendant no.2 could complete the construction work of the road in defiance of the temporary injunction granted by the Civil Court. The conduct of the defendants carrying out and completing the construction work in defiance of temporary injunction granted by the Court, has been taken cognizance by the First Appellate Court referring to the pleading, i.e., para 6(B) and has quashed and set aside the judgment and decree passed by the Trial Court. It is unfortunate that the Trial Court did not read the plaint especially para nos.6(A), (B) and (C) in its proper perspective. The parties cannot be permitted to flout the orders of the Civil Court, if such instances are brought to the notice of the Court and Court has restored the possession on the date of filing of the suit, said order cannot be said to be perverse. In my view, a party to the litigation, cannot be allowed to take an unfair advantage by committing breach of an interim order passed by the Civil Court and escape the consequences thereof. Wrong committed by the party disobeying the order of the Civil Court should not be allowed to continue or perpetuate such wrong as a precedent. Such disregard of the order of the Civil Court should not be permitted to hold good. Such disobedience, if brought to the notice of the Court, what is the duty of the Court? A party suffering breach of injunction order may or may not resort to provision laid down under Order 39, Rule 2(A) of the Code of Civil Procedure. Such party may or may not file or take out contempt petition in accordance with the provisions of law. However, the Civil Court seized with hearing of such lis always can resort to Section 151 of the Code of Civil Procedure. Imposition of punishment or consequences of order passed under Order 39, Rule 2(A) of Civil Procedure Code and/or order passed by the competent Court under the provisions of Contempt of Courts Act, 1971 would be altogether different aspect of the matter. Citizens/litigants who approaches to the Civil Court for adjudication of alleged rights is/are basically interested in seeking remedy/decree/order from the competent Civil Court. Primarily he has concern with relief of Civil nature in his favour from the Civil Court upon adjudication of rights. The Civil Court, therefore, is duty bound, to exercise inherent powers under Section 151 of the Code for setting wrong at naught. This is because it is of high importance that orders of the Court should be obeyed. Thus, in my view, on principle those who defy a prohibition imposed ought not to be able to get away with the fruits of their defiance. If act of the disobedience were to let it go as such, it would defeat the ends of justice and prevalent public policy. When the Court intends a particular state of affair to exist while it is in seizin of lis, that state of affair is not only required to be maintained, but it is presumed to exist till the same Court orders otherwise or Superior Court orders otherwise. The Court, in these circumstances, has the duty and also right to treat such disobedient act as having not taken place at all for its purposes. In my view, these inherent powers u/s. 151 of the Code of Civil Procedure are wide and are not subject to any limitation. To put it in other words, it can be stated that where in violation of stay order or injunction against a party, something has been done in disobedience, it shall be the duty of the Court as a policy to set the wrong, right and not allow the perpetuation of the wrong. In my view, the inherent powers will not only be available in such case, but it is bound to be exercise in that manner in the interest of justice. Even apart from the Section 151 of Civil Procedure Code, in my view, as a matter of judicial policy, the Courts should guard against itself being stultified. In the circumstances like this it cannot be held that Court is powerless to undoing a wrong done in disobedience of Court orders. However, in the case on hand the First Appellate Court has exercised such power under Section 151 of the Code. This exercise, therefore, cannot be said to be arbitrary, absurd or perverse. Paragraph 46 of Vidhya Charan Shukla (Supra) reads as under:

46. We can see thus clearly that the Courts in India invariably accepted the law applied in England and found (1) a party to the suit if he had notice or knowledge of the order of the Court and (2) a third party or a stranger, if he had aided or abetted the violation with notice or knowledge of the order of injunction guilty of civil contempt and otherwise found a (third party guilty of criminal contempt if he has been found knowingly obstructing implementation of its order of direction, if ii is found in the instant suit that Sri Shukla was directly or indirectly a party defendant in the suit and the order of the learned single Judge was directed to his conduct also and he violated the order after notice or knowledge, he shall be guilty of civil contempt. He can still be found guilty of civil contempt if he is found to have aided and abetted the violation of the order of the Court. Even otherwise it is found that he obstructed or attempted to obstruct the implementation of the Court's injunction/direction, he may be found guilty of criminal contempt provided he had the notice or the knowledge of the order of the Court. It will be only after a determination of the nature of the disobedience that it will be possible for the Court to say whether the procedure applied to a civil contempt shall be applied to the contempt proceeding in his case or the procedure applied to a criminal contempt will be applied to it. In the former case, the learned single Judge shall be competent to proceed. In the latter case, it shall be before a Division Bench and subject to such conditions as are envisaged under the Contempt of Courts Act, 1971. We have however no hesitation, in view of the principles of law noticed by us that this Court's power as the Court of Record will extend not only to the determination of the contempt but also the determination whether on the allegations brought before it, a civil contempt is made out or a criminal contempt is made out and instead of any action of committal for contempt, the Court should make any such order which would be in the administration of justice or not. We 'have already noticed that there are provisions in Order XXXIX Rule 2A of the Code of Civil Procedure as a remedy for the violation of temporary or interim injunction. Besides what is contemplated under Order XXXIX Rule 2A of the Code of Civil Procedure, Courts have found another source of power in Section 151 of the Code of Civil Procedure and if that is also ignored for a moment, this Court's power as a Court of Record and a Court of Special jurisdiction is preserved under Articles 215 and 225 of the Constitution of India. There have been cases before several Courts in which when faced with situations that some order or direction was violated and the violation resulted in grave and serious injury, the Courts took the view that the Code of Civil Procedure is not exhaustive. There are cases which say that if remedy to do justice is not provided for in the Code or any other Act, the High Court must not fold its hands and allow injustice to be done.

30 The judgments relied upon by Shri Purohit on the aspect of Section 47 are clearly inapplicable. Firstly, neither of them deals with a situation similar to the present one where a sale/transfer was done in breach of an injunction order and was permitted to be done by a party despite knowledge of the injunction. Further, the said judgments were not dealing with the aspects covered in the various judgments cited by applicants, which squarely apply to the case at hand.

31 The contention of Shri Purohit that Order 21 of the Code of Civil Procedure only provides for payment in 3 situations etc., proceeds on the erroneous assumption that applicants are seeking a direction for payment against CDSL in execution or by way of executing the decree against CDSL. As stated above, as per prayer clause (a) the application only seeks that the parties be restored to the status quo prevailing on the date of the order and does not in any manner seek a direction for payment against CDSL by way of execution of the decree. Once the shares or the monetary value thereof with accrued benefits/interest, is restored, applicants may then take appropriate steps in execution, as permissible in law. (emphasis and underlining added)

63) It thus appears that, the learned Single Judge has invoked inherent power under Section 151 by treating CDSL as a party acting in breach of the injunction. This is clear from the finding recorded in paragraph 29 of the impugned order in which it is held that: “...Court has an inherent power, regardless of any other provisions in law, to restore things to their former condition if a party has acted in breach of an injunction”. (emphasis and underlining added)

64) The judgment in Municipal Corporation, Shirdi (supra) applies to a situation where a ‘party’ to litigation commits breach of injunction. The judgment in Vidya Charan Shukla (supra) also covers the liability of a third-party or stranger committing breach of the injunction order by aiding and abetting such breach, who can be held responsible for civil or criminal contempt. However, for a third party to be held responsible for breach of an injunction order, the Court must arrive at a finding of aiding and abetment by such third party and knowledge that it is committing breach of the injunction order.

65) It is well settled principle that an Executing Court exercising jurisdiction under Section 47 read with Order XXI of the Code, in ordinary course, can make order only against parties to the suit and their representatives. The Executing Court cannot go beyond the decree and extend its scope so as to cover third parties by making them virtually the judgment debtors. Section 47 of the Code defines Court’s jurisdiction and confines it to adjudicating only questions between parties to the suit and relating to the execution, discharge or satisfaction of the decree. In this jurisdiction, interim reliefs can only be granted in aid of final relief and such interim reliefs would ordinarily lie only against parties to the suit. However, there is an exception to this rule where an Executing Court can reach its arms qua a third party who is found to have aided and abetted violation of its order so as to frustrate execution of the decree. It would be too far-fetched to hold that under no circumstances, an Executing Court can touch a third party who has actively breached the order of injunction with the intention of aiding the Judgment Debtor in frustrating the decree. In a given case, Executing Court may be justified in catching hold of even a third party who has acted in connivance with the Judgment Debtor in frustrating the execution proceedings.

66) Since CDSL is a third party to the proceedings, which was not impleaded even in the Chamber Summons in which the ad interim injunction was granted, it became necessary for Respondent Nos. 1 to 3 to demonstrate that it actively aided and abetted breach of the ad interim injunction.

67) The advocate of Respondent Nos. 1 to 3 had communicated the order of ad interim injunction to CDSL, which position is undisputed. CDSL however raised a defence that it made bonafide attempts to implement the order of injunction. The learned Single Judge has however rejected this defence by recording in paragraph Nos. 46 and 47 of the impugned order as under:

46 The contention of CDSL that it could not locate the account of ABG in its system as it was written as “ABG Securities Pvt. Ltd.” and the system had it as “ABG Securities Private Limited” and there are parties with multiple accounts and freezing an account on the basis of inaccurate name would have disastrous consequences are all untenable. Firstly, CDSL claims in its letter addressed to the Receiver on 6th July 2007 that it located the account details of ABG through ABG’s address of Shreyas Building. This very same address had been given in the letter dated 1st June 2005 enclosing the said order, and therefore, there is no basis or cogent explanation as to why CDSL could not have found the same at that time.

47 Further, in its reply letter dated 10th June 2005 CDSL at no point stated that it could not locate the demat account of ABG, due to the purported mismatch of the words “Pvt. Ltd.”, or otherwise. On the contrary CDSL stated that it was in the process of giving effect to the order in respect of the respective demat accounts. It is rather unbelievable that a party would not take the minimum effort of searching for ABG’s name both as “Pvt. Ltd.” and “Private Limited”, when searching for the same more so when there is an order of the Court. “Pvt. Ltd.” is too commonly used a term for CDSL to contend that they did not think to search for ABG’s name with “Pvt. Ltd.” and “Private Limited”. As stated earlier, in its own letter addressed on 9th August 2007, CDSL has referred to ABG as “ABG Securities Pvt. Ltd.” (emphasis supplied)

68) CDSL thus took the defence that it made effort of searching ABG’s account by entering “Pvt. Ltd” and that the search did not yield any result. The learned Single Judge, however, refused to believe the said defence by holding that when a search was made in the context and order made by the Court, it was CDSL’s duty to search for ABG’s name both as “Pvt. Ltd” and “Private Limited”. In our view, CDSL is a total stranger to the transaction between the parties. It is not the case of Respondent Nos. 1 to 3 that CDSL has colluded with the Judgment Debtors or knowingly assisted them. As observed above, CDSL sits at the top of the pyramid comprising of 16 crore plus Demat accounts through 581 Depository Participants. In that view of the matter, it is difficult to believe that CDSL had any intention/motive in breaching the order of ad-interim injunction made by this Court. No doubt, the Court was empowered to exercise its inherent powers under Section 151 of the Code even qua a third party who aids or abets violation of injunction. However, the learned Single Judge has not recorded any finding that CDSL has aided or abetted the Judgment Debtors in committing breach of injunction order.

69) CDSL has never been party to any of the proceedings and is sought to be roped in for the first time in Chamber Summons No.55 of 2009. The shares in the concerned Demat account belonged to ABG Securities and could be ordered to be sold by the Executing Court towards satisfaction of liability of the Judgment Debtor under the decree made on award passed in arbitration proceedings. If there is a transfer of shares from the account of ABG Securities, ordinarily the said account holder needs to be held liable for bringing back the amount/shares. However, what is done by the learned Single Judge is to substitute the Judgment Debtor with a new Judgment Debtor in the form of CDSL. It is complained by the CDSL that such a course of action amounts to going beyond the decree and extending its scope by added a new Judgment Debtor to the decree. As observed above, in a rare case where the Court has found that a third party has acted in connivance with the Judgment Debtor in frustrating the decree, the Executing Court may exercise inherent powers or any other powers under the Code to hold such third party responsible for the breaches and make necessary directions against it. Adding a new Judgment Debtor to the decree by making it liable to bring back to the Court monetary value of the transferred shares is a drastic order, which cannot be passed in ordinary course. It would require an extraordinary circumstance where the Court notices that there is active participation by the third party in frustrating execution of the decree by the third party with full knowledge of what exactly it is doing. Mere act of negligence of a third party, which may result in frustrating execution of decree is not enough for holding a third party responsible for restoration of status quo ante. Therefore, even if the Executing Court is satisfied that a third party is found responsible for transfer of ABG’s shares, that finding alone would be insufficient to make an order against third party making it responsible to discharge obligations of the Judgment Debtor. To adopt such a course of action, there must be extreme degree of mens rea where the third party is found to have actively connived with the Judgment Debtor in siphoning off the Judgment Debtor’s property by sale of which the decree could be satisfied.

70) In the present case, there is neither any material to indicate nor any finding is recorded by the learned Single Judge that CDSL has travelled to such an extent of committing active breach of order of ad-interim injunction by conniving with the Judgment Debtor. Respondent Nos.[1] to 3 themselves do not contend that CDSL has connived with the Judgment Debtors. Their allegation essentially seeks to depict gross negligent act of CDSL in not conducting proper search by blocking the transactions in Demat account of ABG Securities. True it is that CDSL ought to have been careful enough in ensuring compliance with the order of ad-interim injunction. Its defence of making an endeavour to search the Demat Account of ABG Securities by entering into search engine the words ‘Pvt. Ltd.’ is not found favour with the learned Single Judge. However, this would only mean that CDSL has acted negligently in not walking enough distance by conducting proper search by entering into the words ‘Private Limited’ into its search engine. However, this conduct, by no stretch of imagination, would amount to connivance with the Judgment Debtor in actively aiding breach of ad-interim order of temporary injunction. There was no reason for CDSL to do so. In our view therefore the case does not pass the muster for holding CDSL responsible for actively aiding and abetting violation of adinterim injunction by conniving with the Judgment Debtors. Therefore, the long arms of the Executing Court cannot reach CDSL which has been total stranger to the proceedings between the rival parties.

71) In our view, therefore CDSL cannot be held responsible for bringing back the amount of Rs. 1,79,62,131.56/-. Amu’s Appeal No. 109 of 2019 72) Amu was impleaded as a party Respondent to Chamber Summons No. 534 of 2005 and was made aware of the order of ad-interim injunction. Amu has however taken two defences, (in addition to few more), that it was not aware of the order dated 6 May 2005 by the Advocate and in any case, the order dated 6 May 2005 was not directed against Amu. The exact defences raised by Amu before the learned Single Judge have been captured in paragraph 53 of the impugned order:-

53 Shri Jain submitted that: (A) Though a party to the order dated 6th May 2005, Amu was not aware of the order passed and was not informed correctly about the order by its Advocate. (B) There was no order against Amu and therefore, Amu is not liable to ensure compliance thereof or for a breach thereof.

(C) ABG had a debit balance and therefore Amu was entitled to sell the shares and appropriate proceeds in exercise of a stockbroker’s lien under the Bombay Stock Exchange Byelaws, notwithstanding the injunction.

(D) Amu’s contentions that assuming Amu had violated the injunction, no useful purpose would be served in making it bring back the shares or the value thereof, if eventually Amu would be entitled to appropriate all the shares in exercise of the lien. (E) The present proceedings be treated as garnishee proceedings and Amu would be treated as a garnishee who is entitled to adjust against the claim stated to be owing by it. (F) ABG is being proceeded against pursuant to execution of the order of 6th May 2005 and lifting of the corporate veil of ABG by the order dated 7th December 2005 which order of 7th December 2005 was not continued on 27th January 2009 (page

562) as the said order dated 7th December 2005 has not been further extended, there can be no execution against ABG in respect of the order dated 06.05.2005. (G) Amu is an independent stockbroker acting on an arm’s length basis and not at the behest of Ghosh.

73) The learned Single Judge has rejected the defence of its Advocate not informing the order of ad interim injunction to Amu. The defence was rather bizarre and goes against the principle that the knowledge acquired by party’s advocate about the order becomes knowledge by the party as well. The defence appears to have been taken to somehow escape the liability arising out of active aiding in violation of the injunction order, which act of Amu is being discussed separately. We are therefore in agreement with the finding of fact recorded by the learned Single Judge in rejecting Amu’s defence of failure to inform order dated 6 May 2005 by its Advocate.

74) So far as objection that the order dated 6 May 2005 was not made against Amu, ordinarily the findings recorded by us qua CDSL could have applied for Amu also. However, the learned Single Judge has recorded specific findings which indicate that Amu was closely associated with the Judgment Debtors and has acted in active participation in defeating the order of injunction. We proceed to examine correctness of those findings.

75) The shares in the Demat account of ABG Securities have been sold by Amu. Amu raised a defence that it had a debit balance in the account of ABG Securities and was, therefore, entitled to sell the shares and appropriate the proceeds. This defence is rejected by the learned Single Judge by holding in paragraph 66 to 73 as under: Court's views on Shri Jain's submissions – Paragraph 53 (C) and (D):

66 In my view, these contentions are unacceptable. I say this because at no point of time in the present pleadings or in the last 13 years has Amu ever expressly asserted any lien. It is only stated that there was a purported debit balance and that Amu was authorized by a purported letter of Ghosh and ABG, copies whereof are at Exhibit 2 and Exhibit 3 to the affidavit in reply dated 15th June 2009 of one Arvind M. Shah, to retain the sale proceeds of the shares for further adjustments. If indeed, Amu had a lien in law which it was entitled to assert, no such letters would have been required. This clearly shows that Amu has never asserted a lien. Further, even assuming for a moment that Amu had a right of lien and/or the right to sell the shares, the same could never have been permitted in breach of the said order of injunction. The very minimum that would have been required was for Amu to come before this Court and seek modification or vacation of the said order. I have to note, Shri Jain, in fairness agreed that Amu should have approached the Court for clarification or leave to sell and appropriate. Instead Amu has indulged ABG in speculation of sale and purchase of shares after the said order, as evident from the figures at page 17 of Amu’s chart dated 10th December 2018. For ease of reference, the Chart is reproduced herein below: STATEMENT OF AMU'S DUES RECOVERABLE FROM ABG SECURITIES PRIVATE LIMITED Opening Balance as on the date of the injunction, i.e., 6.5.05 -49,51,535.89 Page 362 (Ledger Account) & Page 351 (Correspondence) Speculation Transactions -92,77,874.65 See Statement (INTRA DAY SQUARE OFF TRANSACTIONS) Purchase Amount -1,22,29,803.40 See Statement (DELIVERTY PURCHASE TRANSACTIONS) Total Sale Amount 2,42,25,715.78 See Statement (DELIVERY SALE TRANSACTIONS) Expenses Amount -6,96,984.78 See the Statement hereunder Cheque received from ABG Securities 10,00,000.00 Page 367 (Ledger Account) (towards the bottom) Closing Balance at the very end -19,30,482.94 Page 367 (Ledger Account) & Page 351 (Correspondence)

SERVICE TAX 10,381.25

STAMP DUTY (MAHARASHTRA GOVERNMENT) 84,686.88

SECURITIES TRANSACTION TAX (STT)

GOVERNMENT OF INDIA 4,32,178.84

TRANSACTION TAX (BOMBAY STOCK EXCHANGE) 1,69,737.81

TOTAL EXPENSES 6,96,984.78

67 Having failed to apply for modification or vacation and having actively permitted the share transfers in breach of the injunction, it does not lie with a defaulting party to contend before this Court that there is no major prejudice caused by the sale/transfer and that the breach ought to be excused. All the judgments cited by applicants speak of the majesty of the Court not being permitted to be diluted by a person acting in breach of the order. It is unstateable for a party who commits/permits the breach to say that no material difference would have occurred if the order had been complied with and therefore the breach, done intentionally and with full knowledge of the consequences, ought to be ignored. The reliance of Amu’s Advocates on the judgment of Ghanshyam Sarda (Supra) is misplaced. The Apex Court has simply exercised a discretion on the facts and circumstances of that case as opposed to the brazen manner in which the injunction has been violated by ABG/Amu.

68 In every case, where a party claiming to be a secured creditor (as Amu purports to be) seeks to raise an attachment or restraint on the property secured to it, the party must come before the Court and seek lifting/modification of the order of injunction. To not insist on the same and to permit a party to be excused from complying with the order of this Court would result in misuse as parties would at their ipse dixit decide whether or not to comply with orders of the Court.

69 It is to avoid this very malaise that the Hon’ble Supreme Court and the High Courts have held that as a matter of judicial policy the orders of a Court cannot be permitted to be breached or stultified. Whether any actual benefit is served from restoring the status quo ante or not is entirely irrelevant and cannot possibly be a factor relied upon by the defaulting party to justify its breach and avoid the consequence of having to restore the status quo ante.

70 Once the shares/value thereof are brought back, and if Amu seeks to withdraw the same, it will be open to applicants to resist the same by urging, inter alia, that Amu could never have claimed a lien on the said shares as Amu was in fact barred by law from dealing with the said shares.

71 On the facts and merits of the claim for lien in the present case, even assuming Amu had a lien which they could have exercised, to what extent Amu may be permitted to retain the benefit from the shares sold/transferred has to be ascertained. I have considered in detail the chart that Shri Jain tendered with a compilation on 10th December

2018. Prima Facie, it appears, shares transferred out of ABG’s CDSL demat account after the injunction order dated 6th May 2005 were valued at Rs.1,79,62,131.56 as on the date of their respective transfer as per Schedule V to the chamber summons or Rs.2,42,25,715.78 as per page 17 of Amu’s chart dated 10th December 2018. Amu’s purported balance upon which they could arguably contend that they had a lien was Rs.49,51,535.89 (Amu's ledger) being the purported closing balance as on the date of the injunction. Under no circumstances, can it be suggested that even after the injunction, Amu was entitled to continue to sell and buy shares for ABG, permit ABG to indulge in speculation, rack up a huge purported loss and thereafter claim appropriation of lien of the entire purported loss from the shares sold/transferred in breach of the injunction.

72 It is crucial that the said shares be brought back with accrued benefits or their monetary value along with interest thereon from 2005. It is nowhere proved by Amu that in fact there was a debit balance of Rs.49,51,535.89/-. The accounts relied upon by Amu have no supporting material, nor are they audited or certified accounts. They are simply Amu’s internal ledger which is under their sole control. Once the shares are brought back, Amu will have to first establish and prove the existence and veracity of such purported debit balance. In para 13(f) of applicants’ affidavit in rejoinder dated 31st July 2009, it has been stated that Amu refused to furnish the particulars of the entries in its accounts and refused to furnish copies of the documents pertaining to entries in the said accounts (including copies of bills and journal vouchers) and an adverse inference should be and ought to be drawn against Amu. In reply, Amu in its Affidavit in surrejoinder dated 6 th November 2009 in para 23, has inter alia stated that Amu is not bound to furnish any particulars of the entries in its accounts or copies of the documents pertaining to entries in the said accounts. Applicants have specifically disputed the veracity of Amu’s purported ledger account.

73 Pertinently, Amu had never asserted any right of lien in respect of the said shares at the time of passing of the said order dated 6th May 2005, though present through their Advocate. At no point in the ensuing 13 years has Amu ever asserted a claim or filed proceedings against ABG and/or Ghosh in respect of the purported debit balance it claims it still has. Amu's conduct could be viewed with suspicious collusion with Ghosh. Amu only started dealing with ABG in June 2004 after service on May 11, 2004 of the earlier chamber summons no.754 of 2004; ABG is clearly a front for Ghosh, against whom the BSE Award was passed and execution was pending.

76) In the present case, Amu has not acted as a mere stockbroker by acting on instructions of the demat account holder. It has sold the shares itself for satisfaction of alleged amount due to it. It appears that transactions of buying and selling shares for ABG Securities continued after passing of order of injunction and ABG Securities was permitted to indulge in speculation for the purpose of racking up a huge purported loss and thereafter Amu raised claim for appropriation of lien of the entire purported loss by selling shares in the Demat account of ABG Securities.

77) The learned Single Judge has recorded an emphatic finding that Amu was actually acting in aid of Ghosh/ABG Securities and not in exercise of lien, which is evident from the fact that Amu also purchased shares during the relevant period. To make things worse for Amu, the learned Single Judge has held in paragraph 83 of the order that Amu was otherwise closely associated with Ghosh and always acted at the behest of Ghosh. The findings recorded in paragraph 83 of the order reads thus:

83 Amu has represented as if it is an innocent arm’s length stockbroker dealing for its constituent and therefore should not be liable for breach of the order. This is untenable as evident from the following:

(i) Amu is an entity which was closely connected with and acting at the behest of Ghosh. This observation is based only on the admitted facts from Amu’s own affidavits;

(ii) Amu has admitted that Ghosh was a signatory on the bank account for respondent nos. 4 to 6 herein, which are entities of Amu’s directors, i.e., respondent nos.[2] and 3 herein;

(iii) Respondent nos.[2] and 3, who were Amu’s Directors, had appointed Ghosh as a consultant and for this purported consultancy had given Ghosh, inter alia, luxurious flats at Anand Niwas, A Road Churchgate, and thereafter at Shreyas Building, Nariman Point to live in, for free, for which Amu was the licensee and was paying significant rent;

(iv) Amu made payment of Rs.8,26,643/ to the Official Assignee of this Court, on 16th December 2005, on behalf of Lily who was declared insolvent; and

(v) Amu has at Ghosh/ABG’s behest carried out huge transactions after the injunction order.

78) Correctness of the above findings is not seriously disputed before us. Thus, Amu appears to be closely associated with Gosh family and its entities. The act of Amu selling the shares in the demat account of ABG securities therefore needs to be viewed from the close association of Amu with the Judgment Debtors. Amu has apparently permitted Ghosh and ABG Securities to indulge in speculation for carrying out huge transactions after the injunction order solely for the purpose of creation of liability/debit for discharge of which the shares are shown to have been sold. Thus, Amu cannot be put on the same pedestal as that of CDSL.

79) While absolving CDSL of responsibility to pay to the Receiver the amount as directed by the learned Single Judge, this Court has recorded a finding that CDSL’s acts do not constitute active aiding or abetting of violation of ad-interim injunction in connivance with the Judgment Debtor. However, we are unable to record same findings qua Amu on account of connection established between Amu and Judgment Debtors by the learned Single Judge which would bear out motive on the part of Amu to frustrate the order of ad-interim injunction. Unlike CDSL, Amu had every reason to act in connivance with the Judgment Debtor to frustrate the execution proceedings. The learned Single Judge, upon perusal of the material before it, has rejected the defence of Amu’s lien on share of ABG Securities. The defence of lien, to our mind, does not appear to be not a bonafide one. The learned Single Judge has also examined the manner in which liability was created by indulging into speculating activities solely for the purpose of enabling sale of shares by Amu to frustrate the decree. Though, Mr.Cama has strenuously contended and has also taken us through some of the documents to indicate that Amu sold shares of ABG Securities to itself, we do not find any finding to that effect being recorded by the learned Single Judge. As of now, Amu is directed to merely bring back the specified amount before the Court and the exact role played by Amu in the entire transaction can be subjected to further scrutiny during the course of decision of execution proceedings.

80) Thus, there are atleast two distinguishing factors between CDSL and Amu. Firstly, Amu was a party to the Chamber Summons in which ad interim order was passed. The purpose of its impleadment was to ensure obedience with the order that would be passed in the Chamber Summons. It was made aware of the exact dispute between the parties and cannot feign ignorance. The actions of Amu in selling the ABG’s shares needs to be understood in the light of acquisition of knowledge by it about the proceedings. Secondly, Amu is not a total stranger and is found to be closely associated with judgment debtors. It therefore had every reason to assist the judgment debtors in commission of breach of the injunction order.

81) The Executing Court therefore is justified in extending its long arm and make Amu bring back the money of sold shares. We are, therefore, not inclined to grant any relief in the appeal preferred by Amu.

82) Thus, the impugned order deserves interference only in CDSL’s appeal and no relief deserves to be granted in Amu’s favour. Consequently, we proceed to pass the following order: i. Appeal No. 104 of 2019 filed by CDSL is allowed and order dated 9 January 2019 passed in Chamber Summons No. 55 of 2009 is set aside only qua CDSL. ii. Appeal No. 109 of 2019 filed by Amu is dismissed and order dated 9 January 2019 qua Amu is upheld.

83) With the above directions, both the appeals are disposed of. [SANDEEP V. MARNE, J.] [CHIEF JUSTICE]