Full Text
HIGH COURT OF DELHI
Date of Reserve: 23rd September, 2022
Date of Decision: 9th January, 2023
SH. SUBHASH ARORA S/o Late Sh. J.R. Arora, C/o C-28, Panchsheel Park, New Delhi. ..... Plaintiff
Through: Mr. Raman Kapur, Sr. Advocate with Ms. Damini Chawla & Mr. Manish Choudhary, Advocates.
JUDGMENT
1. SH.
2. SMT.
3. DR.
4. M/S DIMENSION ARCHITECTURE (P) LIMITED. Having its office at: D-38 Panchsheel Enclave,..... Defendants Through: None. CORAM: HON'BLE MS.
JUSTICE NEENA BANSAL KRISHNA J U D G E M E N T I.A.7727/2020 (For Impleadment)
1. Kalyani (India) Private Ltd. has filed an application under Order I Rule 10 Code of Civil Procedure, 1908 (hereinafter referred to as “CPC”) to be impleaded as a party in the present Suit for Specific performance of an Agreement to Sell dated 26.03.2012 between the plaintiff and the defendant.
2. The facts in brief as narrated in the application are that the residential property consisting of Basement, Ground Floor and First Floor built on Plot No.38, Block-B, Masjid Moth, Panchsheel Enclave, Chirag Delhi-110017 measuring 216 Sq. Metres (hereinafter referred to as “suit property”), of which the defendant was the owner, had been mortgaged with Punjab National Bank by the original owners/ allottees. On account of their failure to pay the bank dues, the proceedings were initiated by the Bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “SARFAESI Act”). Punjab National Bank, Mayur Vihar, Phase-II, Delhi held an auction of suit property under the provisions of the SARFESI Act, 2002 on 31st December, 2018. The applicant was declared as the highest bidder in the auction. The sale in favour of the applicant was confirmed by the Bank vide letter dated 01st January, 2019 and the Sale Certificate dated 15th February, 2019 was executed in its favour on 12th June, 2019, and registered on 14th June, 2019 in the Office of Sub-Registrar, 5-A, Hauz Khas, New Delhi.
3. The applicant has asserted that the entire sale consideration of Rs. 4,90,25,000/- has already been paid by him to the Punjab National Bank and the sale transaction has been concluded, despite which the Bank has failed to hand over the possession of the property for the reasons and causes attributable to the plaintiff in the present suit.
4. On 20th March, 2020 the applicant became aware of the present Suit as well as the Order 16th July, 2013. An application was filed before the learned CMM, Saket Courts, New Delhi and a Receiver was appointed vide Order dated 20th March, 2016 with the direction to take physical possession of the suit property.
5. In the interim, Shri Mayank Sharma who is the family member of the borrower had filed a suit for Partition bearing CS (OS) 664/2018 titled Mayank Sharma vs. Santosh Sharma and obtained interim protection in his favour on 21st December, 2018 by concealing the true facts before the High Court of Delhi. The Receiver was unable to take physical possession due to the interim Order dated 21st December, 2018. The applicant on becoming aware of the Order dated 21st December, 2018 moved an application under Order I rule 10 CPC for impleadment in the said proceedings. Likewise, Punjab National Bank also filed an application under Order I Rule 10 of the CPC and also an application under Order XXXIX Rule 4 of the CPC for vacating the interim stay. This Court after hearing the parties vacated the stay dated 21st December, 2018 and disposed of the respective applications of the applicant as well as the Bank.
6. Thereafter, fresh directions were obtained by the Bank from the learned CMM vide Order dated 28th February, 2020 and the respondent issued a Notice for taking physical possession of the mortgaged property in question. In the mean while, plaintiff also filed an application for early hearing in case titled SA/NDN/243/2019 Subhash Arora vs. PNB which is pending before the DRT-I, New Delhi. After hearing arguments on the application, the directions were issued by the learned Tribunal to the plaintiff to make payment but the plaintiff failed to make payment to the Bank in terms of Order dated 20th March, 2020. It is asserted that the plaintiff is trying to get the benefit of the interim protection granted by this Court on 16th July, 2013 and 06th April, 2014. It is apparent that the original borrower as well as the plaintiff are in collusion with each other and have filed vague litigations merely to misguide the Court by concealing real facts.
7. It is asserted that the applicant being the directly affected party, whose presence is not only necessary but also inevitable, may be permitted to be impleaded as a party to the present proceedings. The application for impleadment is accordingly filed on behalf of the applicant.
8. The plaintiff in its reply to the application has asserted that the alleged transaction in favour of Punjab National Bank was entered into either to defeat the Orders of the Court or to violate it and it confers no right, title or interest in favour of transferee. This Court vide Order dated 16th July, 2013 which had been finally confirmed on 04th August, 2014 had restrained the defendants, their legal heirs, agents, assignees from Selling, transferring, alienating or creating the third party interest in the Suit Property. In utter disregard to the said Order, defendants created a mortgage in favour of Punjab National Bank on 02nd August, 2014. The contempt has therefore, been committed of the Order dated 16th July, 2013 intentionally and deliberately. It is asserted that the mortgage and the securitization action initiated by the Bank qua the suit property is void ab initio and consequent auction/ sale confers no right, title or interest in the suit property in favour of the applicant. The plaintiff has claimed that on becoming aware of the proceedings before the DRT-I and about the securitization proceedings, it sought a declaration of the entire auction/ proceedings to be declared a nullity, illegal and void ab initio. The said application is pending adjudication before the Tribunal.
9. In March, 2020, the plaintiff filed an I.A 539/2020 for restraining the Bank/ Court Receiver from taking action against the suit property. The status quo was directed to be maintained by DRT-III in terms of Order dated 20th March, 2020 and restrained further proceedings under SARFAESI Act subject to deposit of balance consideration by the plaintiff. This Order was challenged by the plaintiff before the DRAT and after hearing the matter, it has been reserved for judgment.
10. It is asserted that the applicant had preferred an application seeking impleadment before DRAT but the application was dismissed vide Order dated 19th August, 2020 by holding that since it was not a party before the DRT, it cannot be permitted to intervene in the Appeal.
11. The plaintiff had preferred an S.A. before DRT in February, 2019 challenging the SARFAESI action despite which the applicant has approached this Court only now and the applicant, even if for the sake of arguments is held to be a proper party, it cannot be permitted to join the proceedings at this belated stage. For this reliance has been placed on Vidur Impex and Traders (P) Ltd. vs. Tosh Apartments (P) Ltd. (2012) 8 SCC 384. Moreover, this case is at the stage of defendant’s evidence and addition of any new party at this stage would unnecessarily delay the proceedings.
12. The plaintiff has further claimed that the jurisdiction of this Court to entertain any proceedings in respect of the matter before the Debt Recovery Tribunal or Appellate Tribunal is ousted under Section 34 of the SARFAESI Act, 2002. This Court has no jurisdiction to entertain the application under reply of the auction purchaser/applicant. The mortgage and the securitization action initiated by the Bank in respect of the suit property is void ab initio and this issue is pending adjudication before the DRT. It is claimed that the application is therefore, liable to dismissed.
13. The plaintiff has further asserted that it is dominus litus of the suit and cannot be forced to add parties against whom he does not want to fight unless it is a compulsion of law. Present is a suit for Specific Performance of Agreement to Sell entered between the plaintiff and the defendant. The applicants are not deriving their alleged title from the defendants but are claiming an independent title. The scope of a suit for specific performance is limited and it cannot be permitted to be converted into a Title suit. Moreover, presence of applicant is not required for effective adjudication of the present suit. It is, therefore, submitted that the present application is without merit, and is liable to be dismissed.
14. Submissions heard.
15. The plaintiff in the present suit had originally filed a suit for Permanent and Mandatory injunction in respect of the suit premises. Subsequently, the plaint was amended to include a suit for Specific Performance of the Agreement to Sell dated 26.03.2012. Vide Order dated 16.07.2013, while considering I.A. No. 8884/2013, filed by the plaintiff under Order XXXIX Rule 1 and 2 read with Section 151 of the CPC interim restraint Order was made, relevant part of which is reproduced as under:
16. It is significant to note that as per the averments made in the plaint while entering into an Agreement to Sell, the plaintiff had been informed by the defendant No.1 that their Company, Dimension Architecture Pvt. Ltd (defendant no. 4) had a dispute with United Bank of India from which it had availed financial assistance and the defendant nos. 1 to 3 were the Guarantors and the suit property had been given by them to the Bank as collateral security towards the financial assistance.
17. The plaint further states that Defendant nos. 1 and 2 had assured that they would get the property converted to freehold and from the part payments paid by the plaintiff towards the sale consideration of the suit property, they would resolve the issues and get the collateral security released and discharged from the Bank. The plaintiff was thus, well aware at the time of entering into the Agreement to Sell itself about the charge which had been created and that the suit property was encumbered.
18. The defendant had also duly disclosed in its Written Statement that a cash credit limit of Rs. 500 lakhs was sanctioned in favour of the defendants by United Bank of India on 18.12.2009 and for the purpose of this credit facility extended by the Bank, the collateral security was created by way of equitable mortgage of the suit property in favour of the Bank in addition to hypothecation of the plant and machinery and the personal guarantee of the Directors. A sum of Rs. 252 lakhs out of the Cash Credit Facility was paid by the Bank and it assured the disbursement of balance cash facility of Rs. 248 lakhs as and when required. From the balance amount, the defendants were allowed to avail and utilize the limit of Rs. 90 lakhs besides Rs. 252 lakhs that was disbursed to it.
19. The Defendants made a payment of Rs. 20 lakhs till March, 2010 to the Bank. Thereafter, on account of false representations by the Bank to disburse the balance amount, the defendants undertook a huge project of approximately Rs. 4.[5] crores. However, the Bank unilaterally stopped the credit facility severely affecting the business prospects of the defendants who suffered heavy financial losses.
20. The defendants has further disclosed that the Bank issued a Notice dated 24.06.2010 under Section 13 (2) read with Section 13 (13) of the SARFAESI Act, wherein a sum of Rs. 3,43,52,727.00/- was claimed. The plaintiff while entering into the Agreement to Sell was in the knowledge of the property being encumbered with the Bank.
21. The present application for impleadment has been filed by the applicant who is a purchaser of the suit property in an auction purchase conducted by the Bank with whom the property was encumbered. The short issue is whether the applicant can be allowed to be impleaded in the present proceedings for specific performance of Agreement to Sell.
22. Order I Rule 10 (2) of the CPC empowers the Court to strike out the name of the name of any person improperly joined as plaintiff or defendant and also to add the name of the plaintiff or defendant who should be joined or whose presence before the Court may be necessary to enable the Court to effectually and completely adjudicate upon and settle all the issues involved in the suit.
23. In Kasturi v. Iyyamperumal and Others (2005) 6 SCC 733, the Supreme Court observed that the parties necessary in a suit for specific performance are those who are party to the contract or their legal representatives in case they are death and a person who had purchased the contracted property from the vendor. A subsequent purchaser is a necessary party as he would be affected if he had purchased with or without notice of the Contract, but a person who claims adversely to the claim of a vendor is however not a necessary party. For deciding the question who is the proper party in a suit for specific performance, the guiding principle is that the presence of such party is necessary to adjudicate the controversies involved in the suit for specific performance of the Contract for sale. The twin test to be satisfied for determining the question who is a necessary party are: (1) There must be a right to some relief against such party in respect of the controversies involved in the proceedings; and (2) no effective decree can be passed in the absence of such party.
24. It was further observed in Kasturi(Supra) that Section 19 Sub-sections (a) to (e) of the Specific Relief Act make it absolutely clear that a person seeking addition in the suit for specific performance of the Contract for sale who are not claiming under the vendor but are claiming adverse to the title of the vendor do not fall in any of the category enumerated in Section 19 of the Specific Relief Act. Section 19 is exhaustive on the question as to who are the parties against whom a Contract for specific performance may be enforced. Thus, the question is to be decided keeping in mind the scope of the suit. If on the addition of the person, the scope of the suit for specific performance would be enlarged and would be converted to a suit for title, presence of such parties cannot be said to be necessary at all.
25. In Kasturi (supra) it was further explained that in a suit for Specific Performance in respect of contracted party, the Court has to first decide the lis about enforceability of the Contract entered into between the parties to the suit and not the question as to who is in possession of the contracted property. If a third person asserting his independent right and possession in regard to the contracted property is added in the suit then this process may continue without a final decision of the suit.
26. In the case of Kasturi (Supra), it was found that the proposed respondents had not purchased the contracted property from the vendor after the Contract was entered into. It was observed that the proposed respondents did not seek their addition in the suit on the strength of the contract in respect of which the suit for specific performance of the contract for sale had been filed. Admittedly, they based their claim on the independent title and possession of the contracted property. In such circumstances, it was held that the proposed respondents would not be entitled to be impleaded as a party in such a suit. They were held to be not a necessary party as they would not affect the Contract entered into between the appellant and the other respondents.
27. Sub Rule 2 of Order I Rule 10 CPC uses the expression “all the questions involved in the suit”, from which it is abundantly clear that the legislature intended that the controversies raised between the parties to the litigation alone must be gone into that is to say the controversies with regard to the right which is set up and the relief claimed on one side and denied on the other side and not the controversies which may arise between the parties to the suit and the third party. This would only lead to complicated litigations by going into the trial to decide issues which are totally outside the scope of the suit, the decree of Specific Performance for contact of sale would not affect the rights of the third parties claiming any independent title.
28. In Amol vs. Rasheed Tuck and Sons Ltd. 1956 (1) All Eng.R 273 it was held that a person is legally interested in the answers to controversy only if he can satisfy the Court that it may lead to the result which will affect him legally.
29. Similar view was taken by the Supreme Court in Vijay Pratap Vs. Sambhu Saran Sinha 4 (1996) 10 SCC 53. It may thus be concluded that a third party or a stranger to a contract cannot be added so as to convert a suit of one character into a suit for another character. The collateral matters cannot be included and adjudicated for it would complicate the suit for specific performance into that to title between the plaintiff and the proposed respondents.
30. In Vidur Impex and Traders Private Limited and Others vs. Tosh Appartments Private Limited and Others (2012) 8 SCC 384, in a suit for specific performance of the Sale Agreement, this Court had granted injunction restraining respondents no. 2 from alienating the suit property or creating third party interest and in violation thereof, the defendant executed sale Agreements in favour of third party. The third party sought their impleadment under Order I Rule 10 of CPC, their application was rejected on the ground that the Agreement for sale had been executed by the defendant in favour of third party in a clandestine manner and in violation of injunction of the Court and no valid interest or title could have been transferred to the third party. Further, suppression of material facts took them out of the category of bona fide purchaser and thus their presence was held to be neither necessary nor proper for deciding the suit for specific performance.
31. It was further held that the Court may order impleadment of a purchaser whose conduct is above board, and who makes an application for being joined as party within reasonable time of his acquiring knowledge about the pending litigation. An applicant guilty of contumacious conduct or is beneficiary of a clandestine transaction or a transaction made in violation of the restraint order of the Court, is not entitled to be impleaded as a party.
32. In the case of Anil Kumar Singh vs. Shivnath Mishra Alias Gadasa Guru (1995) 3 SCC 147 it was held that since the applicant was not a party to the Agreement to Sale, it cannot be said that in his absence the dispute as to Specific Performance cannot be decided. In Vijay Pratap (supra) the Apex Court held that to decide the right, title and interest in a suit property of a stranger to a Contract is beyond the scope of suit for Specific Performance of the Contract and the same cannot be turned into a regular title suit
33. From the above mentioned decisions the relevant consideration for impleadment of a person as a party under Order I Rule 10 of the CPC in a suit for Specific Performance for Agreement to Sell may be delineated as under:
(i) Whether in the absence of the applicant, no decree can be passed;
(ii) Whether the applicant has some right to claim a relief against either party; and
(iii) Whether it would be necessary in order to enable the Court to effectively and completely adjudicate and settle all the questions involving in the suit even though no relief is claimed against such applicant.
34. In the present case the applicant is a third party who has purchased the property in the auction held under the SARFAESI Act and his rights are neither flowing from the Agreement to Sell which is the subject matter of the present suit nor do they flow from the defendant who was the owner of the suit property. His rights, if any, have arisen from independent proceedings which are in no way connected with the present suit. In case the applicant is allowed to be made a party, the essential nature of the dispute would be completely displaced as an ancillary controversy in regard to the right of the applicant, who has purchased the property in an auction purchase, to continue in possession would ensue. In fact, as explained in the case of Kasturi (supra) even if a suit for specific performance is decreed, the plaintiff would necessarily be required to undertake the execution proceedings if the possession is to be redeemed from the third party. The rights and the title of the third party can thus, be very well agitated by him in the execution proceedings, since the decree passed in the suit shall not bind him.
35. Likewise, in Gurmit Singh Bhatia Vs. Kiran Kant Robinson and Others (2020) 13 SCC 773, it was observed that merely in order to find out who is in possession of the contracted property, a third party or a stranger to the contract cannot be added in a suit for specific performance of the contract because they are not necessary party as they have no semblance of life to some relief against the party to the contract. It was further observed that even if a decree for specific performance was made against the defendants, the persons who are not parties in the Court would be at liberty either to obstruct the execution or to protect their possession and take legal recourse as they were not a party to contract or Agreement to Sell.
36. Furthermore, the plaintiff herein is dominus litis and cannot be forced to add a party against whom he does not want to file, unless it is compulsion of law, as held in Gurmit Singh Bhatia Vs. Kiran Kant Robinson and Others (2020) 13 SCC 773. It was observed by the Apex Court that the plaintiff is a dominus litis over his litigation and the subsequent transferee of the suit property cannot be allowed against wishes of plaintiff who has filed the suit for specific performance. If the plaintiff despite receiving the notice of claim of title and possession of other persons who are not party to the suit does not want them to join in the pending suit, it is always done at the risk of the plaintiff as he cannot be forced to join a third party as a defendant in the said suit.
37. Here in the present case, the plaintiff who is claiming a decree for execution of Sale Deed in his favour, had already applied before DRT where SARFAESI proceedings are pending wherein he was directed to pay the due amount in order to forestall the sale of the property. However, the plaintiff herein has chosen not to protect the property or to pay the sale consideration in regard to the subject property as directed by DRT. He being the Dominus Litus, has also resisted the impleadment of the applicant.
38. The applicant is shown to be neither necessary nor a proper party to the suit having derived a title through independent auction and not through vendor and his presence is neither necessary nor proper for effective adjudication of the present suit. The application under Order I Rule 10 of the CPC is hereby dismissed.
39. List before the Joint Registrar for recording of Evidence on 15.02.2023.
JUDGE JANUARY 9, 2023 VA/PA