Time Field Corporation v. Shri Sankalp Co-op. Housing Society Ltd.

15. The reply to the Notice of Motion by the Respondents and the Society seeking to set aside the consent decree was filed by none other than Yashwant himself, now wearing his Time Field Corporation partnership hat. In those affidavits-in-reply, which we have seen, Time Field Corporation raised a very peculiar ground of ‘locus’ saying that the individual Respondents were not members of the Society at the time of the consent decree and therefore could not sustain such a Notice of Motion. Time Field Corporation said that Yashwant and Ayre were given irrevocable powers of attorney by 16 individual Society members to alienate the properties and compromise disputes. They claimed that this was sufficient since there was a Resolution of the Managing Committee also approved by the General Body.

16. Yashwant did not dispute that he signed the consent terms under and pursuant to the so-called power of attorney. He said that however, the Society and its members were aware of the consent decree and there was a “default on the part of the Society in discharging its liability” — inherently an absurdity given the nature of the consent terms — and therefore a conveyance came to be registered of the Society’s property in favour Time Field Corporation at the Sub Registrar of Assurances on 3rd April 1995.

17. The Motion came up before a Single Judge of this Court on 9th March 2000. He dismissed it. We have seen that order. In our considered view, it is wholly unsustainable. The learned single Judge proceeded on the footing that the individual members who came to Court had no “locus”. What was completely overlooked was the fact that the sole Defendant to the suit was the Society, a separate and distinct juristic entity entitled to sue and they sued in its own name. The Single Judge took the view that the Motion could not be said to have been filed on behalf of the Society. The true nature of the consent decree and what it purported to do, at whose instance and under whose signature completely escaped scrutiny.

18. The Society and the individual members appealed. The appellants were not only the individual members. The 1st appellant was the Society itself. On 1st November 2004, the appeal Court stayed the execution of the consent decree and its amendments and required a deposit of Rs.10 Lakhs by the Society. Then came the final order of 25th February 2010 in the appeal. A copy is at pages 409 to 416. The Appeal Court allowed the appeal entirely.

19. We are being told now by Mr Kini on behalf of the present appellant, the original plaintiff, Time Field Corporation that the Appeal Court directed or mandated that the question of locus of the appellants (the Society individuals) would have to be “decided first”. The submission is entirely without merit. We are shown paragraph 2 of the appellate order at page 411. This is how it reads. “2. The Notice of Motion was moved by the Members of the Defendant-Society praying for setting aside an exparte consent decree and for an injunction. The Appellants claim to be the Members of the Defendant- Sankalp Cooperative Housing Society Limited. It is their contention that Padma Jawale was purportedly acting as Secretary of Society in connivance with her husband. Yashwant Jawale obtained a consent Decree fraudulently in Civil Suit NO. 469 of 1978. Many grounds have been raised to show how fraud was played with which we are not concerned for the present. The Notice of Motion does not seem to be dealt with by the learned Judge on merits. He found that the present Appellant did not have a locus to maintain Motion, since neither of them could be said to be a Member.”

20. The interpretation placed by the appellant is misconceived. This is not a finding of the Court. It is a noting of the submissions made before the Division Bench. What are relevant are paras 6, 7 and 8 at pages 414 to 416, reproduced below: “6. The important thing that ought to be considered by the learned Judge was whether the interest of the present Appellants i.e. new members needed to be protected. Further, when it was alleged by the Appellants that a fraud has been perpetrated by Jawale and family and interest of the Members was not protected, it was all the more necessary for the Court, to have given an opportunity to the Appellants/Applicants to make out a case that they were Members and their interest was not protected and that fraud was played.

7. In any case as already observed, the Administrators are also one of the Appellants. In no case, therefore, the Motion could have been rejected as filed without locus. That should be considered by giving an opportunity to the parties to tender their respective oral / documentary evidence. The Order passed by the learned Judge is, therefore unsustainable and therefore, needs to be set aside.

8. Hence, the appeal is allowed. The impugned order is hereby quashed and set aside. Notice of Motion No. 3831 of 1999 is restored to file for de novo decision after allowing the parties to lead evidence about membership of any of the appellants of the said Society i.e. Shri Sankalp Co-operative Housing Society. Undoubtedly, all contentions, on merits are left open.” (Emphasis added)

21. There is no manner of doubt that the Single Judge’s order was set aside on all grounds. The matter was remanded for a de novo decision. All contentions were kept open. Parties were allowed to lead evidence about membership of the Society. This does not by any stretch of the imagination mean that the question of fraud as alleged by the applicants could not be examined until after locus was determined. It only means that the single judge was in error in not allowing that evidence to be led.

22. The matter came up on 6th March 2017 before one of us (GS Patel, J). Issues were framed. We find these at page 420 and they read thus: “1. Whether the Respondents prove that on the date of the Consent Decree, i.e., 19th April 1993 each of them was a member of the 1st Defendant- Society?

2. Whether the Applicants prove that they are entitled to an order setting aside the Consent Decree and its subsequent amendments ?

3. What relief and what Order?”

23. Before us it is submitted that as a result of these issues, if the applicants could not establish locus, they could not advance to the next issue on merits. That is completely incorrect. Not only can issues be re-framed at any time before judgment, and fresh issues added, but Issue No. 2 is not cast as being in the alternative or dependent upon the result of a finding on Issue No. 1.

24. The learned Single Judge has dealt with this fully in paragraphs 32 and 33 of the order dated 2nd June 2020 impugned in the present appeal (the order passed on remand of the Notice of Motion): “32. It is true that this Court has framed issue No.1 to cast liability on each of the respondents-applicants to establish that he/she was a members of the society on the date of passing of the consent decree. However, the order of the Appellate Court makes the position abundantly clear. The Appellate Court had remanded the matter for de-novo decision after allowing the parties to lead evidence about the membership of any of the appellants of the said society. These directions are required to be considered in the backdrop of the context of the proceedings.

33. It is well neigh settled that fraud vitiates everything. A decree or order obtained by fraud is non-est in the eye of law. The nullity of such decree or order obtained by fraud can be agitated in any proceeding and at any stage, despite finality having been attached to the proceedings. From this stand point, in my considered view, the aforesaid proof of interest of Mrs. Sushma Rathi, the predecessor-in-title of Mrs. Bharati Mehta, is adequate to cloth Mrs. Bharati Mehta, with the legal standing to assai the consent decree is null and void on account of alleged fraud.”

25. Before Jamadar J, affidavits of evidence of as many as 18 witnesses were filed by the applicants seeking to set aside the decree. The applicants chose not to examine all of them. Their evidence was closed. Only one witness, one Mahendra Mehta was examined. In the meantime, both Yashwant and Padma died. Their son, Pawan, was examined on behalf of the Plaintiff.

26. The learned Single Judge considered the evidence and the material in the context of the issues framed. He considered all three issues together with a common reasoning; that is completely understandable. In paragraph 26, he considered Mehta’s evidence on behalf of the applicants. This was, of course, in the context of the Time Field’s argument that, to be able to even apply to set aside the consent decree, the applicants ought to have been members of the Society at the time of consent decree. Jamadar J considered this in in paragraph 29. He found that though seemingly attractive, the argument about locus was a complete red herring. Regard would have to be had to the nature of the proceedings and the transactions now brought on record. In paragraphs 29 and 30, he noted that the record now showed that there was an original instrument under which Yashwant purportedly allotted Flat 301 to one Sushma Rathi on 5th September 1981. That would have made her a member of the Society and her entitlement to the flat could not be disputed. It was shown by evidence that Ms Rathi was the immediate predecessorin-title of witness Mehta’s wife, Bharati. Time Field Corporation did not challenge that. What this showed, therefore, was that at the date of the consent decree, Sushma Rathi had in her vested in her a subsisting and transferable interest in Flat 301. Sushma Rathi did not say that she had transferred her interest to Time Field Corporation or its partners. But she validly passed title to witness Mehta’s wife. That ended the question of locus. Indeed, we believe it was entirely within the remit of the learned single Judge to have held that the question of locus was immaterial or moot, given the factual conspectus. The more so since the Society, a distinct legal entity, was itself a party Applicant. For there was, as we have noted, no mandatory direction of the previous appeal bench that the question of locus had to be decided (let alone that it had to be decided first).

27. We can do no better than to reproduce as our own finding paragraphs 34 to 37 of the impugned order. “34. The matter can be looked at from another perspective. The fundamental question which wrenches to the fore is can the existence of a Co-operative Society, which has the trappings of a Corporation, be wiped out by restoring to the means which are alleged to be fraudulent? Can the members of such a society, which is neither deregistered nor wound up in the manner known to law, and continues to be in existence by the orders passed by the authorities under the Act, 1960, be precluded from agitating that the consent decree, whereby the Co-operative Society is deprived of its corporate existence and divested of its property, was obtained by practicing fraud? In my view, in these circumstances, the issues of locus and procedural challenges stand relegated to a subsidiary stage, provided a clear case of fraud is made out.

35. Was there a fraud? For an answer, the circumstances, which transpired on the date of passing of the said decree, as are evident from the order passed by the Court on 19th April 1993, assume critical salience. From the perusal of the order, it becomes evident that the plaintiff firm was represented by Mrs. Padma Jawale, in the capacity of the partner of the plaintiff. Mr. Yashwant Jawale, her husband, was also present. It was represented to the Court that he was a member and constituted attorney of the defendant society. The Court was further informed that the dispute has been settled and the consent terms have been arrived at and recorded. Mrs. Padma Jawale and Mr. Yashwant Jawale vouched for the correctness of the consent terms and execution thereof by them. The consent terms (Exh.’X’) were taken on record. The Court thus directed that the decree be drawn in terms of the said consent.

36. It would be contextually relevant to note that Mr. G.R. Hegde, Advocate represented the plaintiff. Mr. C.M. Mankad represented the defendant society. At the request of Mr. C.M. Mankad, Advocate for defendant society, as noted by the Court, issuance of the certified copy of the consent decree was expedited. The Court further recorded that Mr. Mankad undertook to furnish xerox copy of the power of attorney of the defendant in favour of above-named representative of the defendant by the next date.

37. The later two observations cannot be said to be inconsequential. They indicate that, firstly, the defendant was more desirous of obtaining the certified copy of the consent decree, which betrayed an element earnestness to facilitate its execution. Secondly, a genuine doubt arises as to whether the copy of the power of attorney was then tendered for the perusal of the Court. Evidently, the Court has not recorded that the Court did peruse the copy of the power of attorney, on the strength of which Mr. Yashwant Jawale claimed to represent the defendant society. Had the Court perused the copy of the power of attorney, the Court would not have probably recorded an undertaking on the part of Mr. Mankad, the Advocate for the defendant, that a xerox copy of the power of attorney executed by the defendant in favour of Mr. Yashwant Jawale would be furnished by the next date. It would be legitimate to infer that had the original power of attorney been tendered for the perusal of the Court and the Court desired its copy to be placed on the record, the same would have been directed to be done on the same day.”

28. We emphatically affirm these findings in every single respect. We go further: we return a specific finding now that there was an active attempt by Yashwant and Padma to mislead the Court by (i) suppressing their relative positions; (ii) not disclosing to the Court that they were both partners in the Plaintiff firm, Time Field Corporation; and (iii) that there was no power of attorney from the sole Defendant at the time of the Consent Decree, viz., the Society itself, though it was a corporate aggregate entitled to sue and be sued in its own name. On its own, (iii) renders the question of ‘locus’ entirely otiose. Membership of a society has nothing to do with the right of the society as a distinct legal entity to file or defend a suit. Members come and go. The composition of a society’s managing committee changes periodically — indeed, it has to, with regularly scheduled elections. It follows, therefore, that viewed from any perspective, this was nothing but a blatant attempt to pull the wool over the Court’s eyes and hide from the Court what was really being attempted by the Jawales.

29. The learned Single Judge then looked at the principal terms of the contract. He was invited to consider some law. He emphatically rejected the submission that the power of attorney served to transfer title; the very suggestion is absurd. He correctly held on the basis of settled law that the juristic character of the Society is not effaced. He relied inter alia on the decision of the Supreme Court in Daman Singh v State of Punjab,[1] which says that once a person becomes the member of the Society he loses his rights vis-à-vis the Society, and has then no independent rights except those given by the statute and the bye-laws. He can only speak through the Society. It is only the Society that can speak an act for him as regards the rights or duties of the Society as a body. A cooperative society is thus a form of a body corporate or a ‘corporate aggregate’ within the meaning of the law. This is also the view of a learned single Judge of this Court in Aditya Developers v Nirmal followed in Westin Sankalp Developers v Ajay Sikandar Rana & Ors;3 Chirag Infra Projects Pvt Ltd v Vijay Jwala CHSL & Anr;4 and Rajawadi Arunodaya CHSL v Value Projects Pvt Ltd.[5] We reaffirm and approve the decision in Aditya Developers, supra. The Division Bench judgment of this Court in Girish Mulchand Mehta & Ors v Mahesh S Mehta & Ors[6] also considers the question of society members’ “individual rights” in opposition to the rights and duties of a society in regard to society property. In State of UP & Anr v COD Chheoki Employees’ Cooperative Society Ltd & Ors,[7] the Supreme Court said that a member of a society has no independent right vis-à-vis the society (and cannot individually assail the constitutionality of the statute, or the society’s rules and bye-laws). The society represents as a ‘corporate aggregate’.

30. Apart from considering the contents of the consent decree, Jamadar J also considered the irrevocable Power of Attorney on which Yashwant so heavily relied. He found in paragraph 53 that its execution was necessitated only because Government auditors had filed a criminal complaint against the Chairman, Secretary, Treasurer, Architect and Yashwant himself, the contractor. This Power of Attorney re-affirmed Yashwant’s position as a contractor. It is for this purpose that Yashwant and Ayre were made Constituted Attorneys. The Power of Attorney seems to have been in the more or less common or general form, and it is thus evident that Yashwant 2 2016 SCC OnLine Bom 100: (2016) 3 Mah LJ 761).

4 2021 SCC OnLine Bom 364: (2021) 3 Bom C 271. and Padma took undue advantage of two standard-form clauses to grab the property of the Society. Jamadar J also found that seven members who had apparently given individual Powers of Attorney to Time Field Corporation and its partners had filed Suit No.2253 of 1986 for declarations that the principal agreement of 20th April 1975, the supplementary agreement of 20th April 1975 and the further agreement of 30th April 1976 entrusting works to Time Field Corporation were validly terminated by the Society and by those seven members. Time Field Corporation claimed that the Suit was compromised because those Plaintiffs received consideration. All seven resigned from membership of the Society and confirmed receiving payment. In contrast, the Applicants before Jamadar J claimed that on the basis of the 8th October 1984 Power of Attorney Yashwant executed further instruments and allotted flats to others (including themselves) for good consideration. The relinquishment of these rights, Jamadar J found, would not transfer title in any flat to Yashwant. That was not even Time Field Corporation’s case. Consequently, there remained a very large question mark on Yashwant’s actual, or even ostensible, authority to purport to represent the Society at the time of the consent terms.

31. This led the learned Single Judge to the critical question of the misrepresentation evidently made to the Court at the time when the consent decree was sought. Here we must reproduce paragraphs 60 to 64 of the impugned order. “60. This propels me to the crucial aspect of the representation, rather misrepresentation, before the Court, at the time, the consent decree was obtained. To begin with, it has not been categorically denied that there was no resolution of the society preceding the execution of the consent terms. The manner in which Mr. Yashwant Jawale changed his capacity seamlessly is of critical significance. It needs no emphasis that for Mr. Yashwant Jawale, being a partner of the plaintiff firm (the contractor), which had instituted the suit primarily for the purpose of recovery of the cost of the work executed), the representation on the part of the defendant society was a clear of conflict of interest.

61. It is pertinent to note that though the plaint was signed and verified by Mrs. Padma Jawale, in the capacity of the partner of the plaintiff, yet, Mr. Yashwant Jawale, had also represented the plaintiff in the said suit. On 31st March 1980, Vakalatnama of M/s. D.J. Kamdin and Co. came to be filed on behalf of the plaintiff. The said Vakalatnama was signed by Mr. Yashwant Jawale in the capacity of its partner. In Notice of Motion No. 539 of 1980 in the said suit, Mr. Yashwant Jawale had sworn an affidavit in support of the plaintiff’s claim, again the capacity of its partner. An inference thus becomes inescapable that Mr. Yashwant Jawale actively prosecuted the suit.

62. Though, during the course of cross-examination, Mr. Pawan Yashwant Jawale (P.W.No.1) feigned ignorance as to whether Mr. Yashwant Jawale signed Vakaltnama on behalf of the defendant society as well. Yet, the circumstances in which Mr. C.M. Mankad, Advocate came to represent the defendant society render the said charge far from disproved. Initially, Y.S. Abhyankar and Co. filed vakalatnama on behalf of the defendant society on 18th April 1978. The vakalatnama was duly signed by the office bearer of the defendant society. Later on, M/s. Chitnis Vaity and Co. filed vakalatnama on behalf of the defendant society. The vakalatnama of Mr. C.M. Mankad came to be filed on behalf of the defendant on 25th November 1992. The vakalatnama seems to have been signed by the Chairman of Shri Sankalp Co-operative Housing Society Ltd. Though it would be hazardous to draw an inference on the basis of the comparison of signatures that Mr. Yashwant Jawale signed Vakalatnama on behalf of the defendant as well, (having already signed the vakalatnama in the capacity of the partner of the plaintiff), yet, there are concomitant circumstances which justify such an inference.

63. Mr. Yashwant Jawale was arraigned as the defendant in Suit No. 2253 of 1986. Mr. C.M. Mankad, Advocate represented Mr. Yashwant Jawale in the said suit and signed the consent terms in that capacity, as is evident from the consent terms recorded in the said suit. It is interesting to note that the defendant society filed a Writ Petition bearing No. 1764 of 1993 along with Mr. Yashwant Jawale in the capacity of Chairman and constituted attorney assailing the notice dated 11th June 1993 issued by the Municipal Corporation for the alleged regulatory breaches. The said writ petition was instituted after a couple of months of the passing of the consent decree. The endeavour on the part of the plaintiff to deny that Mr. Yashwant Jawale also professed to discharge the functions of the Chairman of the defendant society thus does not merit acceptance.

64. From the perusal of the aforesaid material, it becomes evident that Mr. Yashwant Jawale professed to represent the plaintiff and the defendant in the same suit at different points of time. The inevitable conclusion is that there was no proper representation of the defendant society when the consent terms were executed and the consent decree followed. The Court was made to believe that there was a proper representation of the defendant society and the consent terms were arrived at between the parties freely. This factor coupled with the expropriatory nature of the consent terms whereby the co-operative society was sought to be deprived of its existence and divested of its property, for all intent and purpose, would lead to no other inference than that of the consent decree having been obtained suggestio falsi and suppressio veri.”

32. Again, this has our most emphatic approval and affirmation. As the learned Single Judge said, the Court frowns on sharp practices. We would go further. This is in the clearest terms a fraud not only on the Defendant-Society and its members but is fraud on the Court. The Plaintiff’s partners purported to represent both sides, kept this from the Court and, by this stratagem, sought to hijack the entire property of the sole Defendant Society. That is the whole of it. There is no question of an individual member’s locus coming in the way.

33. There is no question that there has been a fraud on the Court and that the Plaintiff and its partners are guilty of misrepresentation or fraud in obtaining the consent decree. It is entirely vitiated and is a nullity. On the aspect of a fraud on the Court, the learned Single Judge correctly referred to the Supreme Court decisions in SP.Chengalvaraya Naidu v Jagannath[8] and AV Papayya Sastry & Ors v Government of Andhra Pradesh & Ors.[9]

34. The impugned order resulted in the setting aside of a fraudulent consent decree. The consequence is that the Suit is restored as if it had never been disposed of. The Plaintiff is put back in its original position as if the consent terms were never filed, i.e., now to pursue its original claim for a money decree. As there was no adjudication on merits in the consent decree, and no adjudication of the original case in the Plaint in the impugned order, the suit itself is unaffected by the impugned order.

35. In assessing the impugned order, we must remain mindful of unbroken line of authority of the Supreme Court from Wander Ltd & Anr v Antox India Pvt Ltd,10 Mohd Mehtab Khan v Khushnuma and, most recently in 2022, in Shyam Sel & Power Ltd & Anr v Shyam Steel Industries Ltd.12 Unless the view of the learned Single Judge in an interlocutory application is found to be perverse, arbitrary or capricious, an appellate Court will not interfere. The view of the learned Single Judge in the impugned order is not merely, in our opinion, a plausible or a possible view. On the material before the Court, it is the only view that any Court, especially a Court of equity, could have taken. If this conduct of a plaintiff does not shock a judicial conscience, then very likely nothing will.

36. The only shortcoming, if we may call it that, we find in the impugned order is that the learned Single Judge did not impose costs on the Plaintiff. In our view, he would have been well within his rights to impose exemplary and even punitive costs. But since he did not do so, we refrain from doing so either.

37. The appeal is entirely without merit. It deserves only to be dismissed. It is. No costs.

38. SC Suit No 469 of 1978 is restored to file and will now proceed to trial in the normal course. (Madhav J. Jamdar, J) (G. S. Patel, J)