M/S D B P Limited vs M/S D H A F P Limited & Ors

,,

Gita Mittal, J",,

CM No.18056/2017 (delay of 49 days) in FAO(OS) No.147/2017,,

For the reasons stated in the application, delay in filing the appeal is condoned.",,

This application stands disposed of.,,

FAO(OS) No.72/2017,,

FAO (OS) No.147/2017,,

These two appeals relate to the property bearing No.11, Ring Road, Lajpat Nagar, Part â€" IV, New Delhi (hereinafter referred to as “the suit",,

propertyâ€​) which is the subject matter of CS(OS) No.484/2016 titled M/s DBP Limited vs. M/s DHAFP Limited & Ors.,,

In this suit, on 14th February, 2017, arguments were heard on two applications and while the ld. Single Judge has rejected I.A. No.11750/2016",,

(under Order XXXIX Rule 1 & 2 of CPC filed by the plaintiff-M/s D.B.P. Limited), however, no orders stand passed on I.A. No.12871/2016 (under",,

Order VII Rule 11 of the CPC filed by the defendant no.6-M/s. Prem Enterprises).,,

The facts necessary for adjudication of these appeals to the extent necessary are noted hereafter. For expediency, we are referring to the parties",,

by the nomenclature as assigned to them in CS(OS) No.484/2016.,,

We may also hasten to add that inasmuch as we have been called upon to consider the application under Order VII Rule 11 of the Code of Civil,,

Procedure, we are referring to the facts as brought on record only in the plaint in CS(OS)No.484/2016 as well as the documents filed by the plaintiff",,

(appellant in FAO(OS) No.72/2017 herein) in that suit before the ld. Single Judge.,,

M/s DHAFP Limited (defendant no.1) had purchased the said suit property in a court auction (conducted pursuant to an order passed in Suit,,

No.585/1974 on 21st November, 1990), for an amount of Rs.65,77,379/-. It is the case of the plaintiff that the amount of sale considerationÂ",,

was advanced by it to DHAFP Limited (defendant no.1) and that the defendant no.1 had created an equitable mortgage by depositing the,,

original title deeds and handing over the possession of the said property in favour of the plaintiff.,,

So far as the need to file the suit is concerned, in para 2 the plaint contends the following:",,

“2. Immediate need to file the present suit has arisen in view of the fact that on 08.09.2016, Defendant Nos.1 to 6 without any",,

information and notice to the plaintiff and for no rhyme started breaking the building by use of Bulldozers, JCB machines and deployed",,

huge man power to remove debris by use of dumper trucks. Effect of which is that the property in possession of the plaintiff is partially,,

broken resulting into dispossession and due to the broken construction material/debris in the property, which has fallen all over the access",,

to the basement floor is also impossible. All the records/files papers/furniture/store items belonging to the plaintiff have been illegally,,

removed or are dumped inside the debris. Instantaneously police complaint was made and thereafter this Hon’ble Court is being,,

approached to protect the property and the security of the plaintiff. â€​,,

(Emphasis supplied),,

It is essential to refer to some further portions of the plaint. In paras 25 & 26, averments stand made as regarding the accrual of the cause of action",,

for filing of the suit in question and reads as follows:,,

“25. Apart from the protection and recovery of possession of plaintiff at the two floors namely 2nd floor and basement of the suit,,

property being Plot no.11 at Ring Road, Lajpat Nagar, New Delhi â€" 24, plaintiff is entitled to the possession of complete security, namely",,

the complete suit property and for recovery of the mortgage money by recovery of the principal amount and interest thereupon at the rate of,,

24% per annum apart from the cost charges and expenses incurred by the plaintiff. Plaintiff is also entitled to get cancellation of the,,

documents illegally and fraudulently executed by the Defendants so as to defraud the Plaintiff.,,

As on date of filing the present Suit, the amount due from the mortgage of the suit property being Plot no.11 at Ring Road, Lajpat Nagar,",,

New Delhi â€" 24, is a total of Rs.65,00,000/- (Rupees Sixty Five Lacs) alongwith interest at 24% per annum from 19.5.1997 till the date of",,

realization. The beneficiaries/Defendants (but for Defendant No.7) are jointly and severally liable to pay.,,

That the CAUSE OF ACTION for filing of the present suit arose on 08.09.2016, when the Defendants started breaking the suit property",,

and after which present management of the Company became aware of the fraud played upon by the Defendants as detailed in Para 3,,

above. Prior to this vide order dated 11.03.2014, present management of the company took over after a long drawn litigation, when the",,

Company Law Board passed a judgment in the case of Arun Mehra & Anr versus Durga Builders (P) Limited & Ors in C.P. No.112 (N.D.),,

of 2013, wherein the validity of the agreement dated 19.05.1997 was upheld and Mr Arun Mehra and his wife Mrs Seema Mehra were",,

recognized as the shareholders. The cause of action is continuing one.â€​,,

(Emphasis supplied),,

Mr. Davinder Singh, ld. counsel for the plaintiff has vehemently contended that the plaintiff is a victim of fraud at the hands of",,

Mr. R.K. Nanda as well as the defendant nos.2 to 4. It is submitted that pursuant to an agreement dated 19th May, 1997, 100% shares of the",,

erstwhile Directors in M/s Durga Builders (P) Limited were purchased by Mr. Arun Mehra and his wife Mrs. Seema Mehra. However, despite this",,

agreement and the transaction having been completed, Mr. R.K. Nanda continued to exercise control over the company necessitating the proceedings",,

before the Company Law Board. Mr. Singh has contended that it was on the 11th March, 2014, that the Company Law Board had declared that Mr.",,

Arun Mehra and his wife Mrs. Seema Mehra were shareholders in the company and directed to hold a meeting of the new Board which meeting was,,

conducted on the 24th March, 2014.",,

In the plaint, the plaintiff has also made reference to a complaint made by M/s Class Sales Pvt. Ltd. to the Economic Offences Wing in the year",,

2016. It is submitted by Mr. Saurabh Kirpal, ld. counsel for the defendant no.6 that Mr. Arun Mehra is one of the Directors of M/s. Class Sales Pvt.",,

Ltd. This fact is not disputed by the ld. counsel for the plaintiff.,,

So far as the claim against the defendants is concerned, the plaintiff refers to the sale of the suit property at approximately Rs.70 lakhs by Mr.",,

R.K. Nanda acting on behalf of the defendant no.1 â€" DHAFP Limited to the defendant nos.2 & 3 purportedly in the year 1998. There is a,,

reference in para 15 of the plaint that there are two Agreements to Sell, one dated 2nd January, 1999 and the subsequent Conveyance Deed dated",,

24th January, 2000.",,

So far as defendant no.6 is concerned, we find that without making any averments in the plaint regarding further transfer by the defendant nos.2 to",,

4 in favour of the defendant no.6, in the prayer clause, the plaintiff has sought decree of declaration declaring the alienation dated 16.07.2011 through",,

registered sale deed of the suit property in favour of the defendant no.6 â€" M/s Prem Enterprises as null and void.,,

It is submitted by Mr. Davinder Singh, ld. counsel for the plaintiff, that the transfer of the suit property in favour of the defendant nos.2 to 4 and",,

the defendant no.6 were collusive and fraudulent. The plaint makes an averment that the sale consideration allegedly paid by the defendant nos.2 to 4,,

did not even come into the accounts of the company and, further, that it was sold at an extremely low price lending support to the plaintiff’s case",,

that it was fraudulent.,,

The basic challenge on behalf of the plaintiff to the transactions, rests on the contention that the conveyance deeds were illegal, null & void and of",,

no effect in the eyes of law resulting in the deprivation the right of the plaintiff over the suit property.,,

Premised on these assertions, the plaintiff filed CS(OS) No.484/2016 on 20th September, 2016 seeking the following prayers:",,

“(a) Pass a decree for the recovery of the mortgage money and direct Defendant Nos.1 to 6 to pay the   principal amount and interest,,

in terms of the calculation made at Para No.25 of the suit plaint alongwith pendent lite interest at 24% per annum till actual payment;,,

and/or,,

(b) Pass an order injuncting Defendant Nos.2, 3 and 6 from interfering with the possession of the Plaintiff in the 2nd floor and basement of",,

the suit property being Plot No.11, Ring Road, Lajpat Nagar â€" IV, New Delhi â€" 110024 and restoring the possession of the part of the",,

suit property already interfered with, and/or",,

(c) Pass a decree of declaration thereby declaring that both Agreements to sell each dated 02.01.1999 in respect of property being Plot,,

No.11, Ring Road, Lajpat Nagar-IV, New Delhi â€" 110024 are illegal, null and void and cancel the same; and/or",,

(d) Pass a decree of declaration thereby declaring that the Conveyance Deed dated 24.01.2000 executed by Defendant No.7 in favour of,,

Defendant Nos.2 and 3 in respect of property being Plot No.11, Ring Road, Lajpat Nagar-IV, New Delhi â€" 110024 is null and void and",,

of no effect and cancel the same; and/or,,

(e) Pass a declaration thereby declaring that the gift deed dated 10.09.2008 in relation to the suit property in favour of Defendant No.2 in,,

respect of property being Plot No.11, Ring Road, Lajpat Nagar-IV, New Delhi â€" 110024 is illegal, null and void and of no effect and",,

cancel the same; and/or,,

(f) Pass a decree of declaration thereby declaring that the alienation in favour of M/s Prem Enterprises (Defendant No.6) on 16.7.2011,,

through registered sale deed of property being Plot No.11, Ring Road, Lajpat Nagar-IV, New Delhi â€" 110024 is null and void and of no",,

effect and cancel the same; and /or,,

(g) Pass a decree in favour of Plaintiff and against the Defendants for restoration of possession thereby directing Defendant Nos.2, 3 and",,

6 or their assignees, representatives, agents or any person, whosoever is found in possession of the property being Plot No.11, Ring Road,",,

Lajpat Nagar-IV, New Delhi â€" 110024, to hand over the said property to the Plaintiff Company forthwith; and/or",,

(h) Pass a decree of permanent injunction in favour of the Plaintiff and against the Defendants thereby restraining Defendant Nos.2, 3 and",,

6 or their assignees, representatives, agents or any other person from in any manner selling, transferring, alienating or parting with",,

possession of property being Plot No.11, Ring Road, Lajpat Nagar-IV, New Delhi â€" 110024 in any manner whatsoever to any person,",,

except the Plaintiff; and/or,,

(i) Pass a decree granting damages/compensation to the Plaintiff for the illegal acts on the part of Defendant Nos.1 to 6 for which an,,

enquiry should be ordered and upon enquiry whatever damages compensation is found to be reasonable, the Plaintiff hereby agrees and",,

undertake to pay the actual court fee on the amount of damages which may be awarded in favour of the Plaintiff at the time of passing the,,

decree; and/or,,

(j) Cost of the suit be allowed to the Plaintiff;,,

(k) Any other relief which this Hon’ble Court deems fit in the circumstances of the case may be granted to the Plaintiff and against,,

defendants.â€​,,

(Emphasis by us),,

Along with the plaint, M/s DBP Ltd. (the plaintiff) filed I.A.no.11750/2016 under Order XXXIX Rules 1 and 2 of the CPC praying for grant of",,

interim injunctions against the defendants in respect of the said property. On this application, when the suit came up for hearing for the first time on",,

22nd September, 2016 ex parte ad interim injunction was granted. The defendants contested this application.",,

The ld. Single Judge examined the prayers for interim injunction made by the plaintiff by way of I.A. No.11750/2016 which was then rejected by,,

the order dated 14th February, 2017.",,

So far as the prayer for grant of interim injunction prohibiting transfer and alienation of the suit property, in the impugned order dated 14th",,

February, 2017, the ld. Single Judge was of the opinion that in view of Section 68 of the Transfer of Property Act, the right to sue for mortgaged",,

money arises in favour of the mortgagee in cases enumerated in Clauses 1(a) to 1(d) thereof and that the only right given to a mortgagee under the,,

mortgage is to ensure the payment of the money. It was observed that till this is done, the mortgagee can seek the continuation/retention of the",,

security. The ld. Single Judge has also clearly noted that the very factum of there being a mortgage of 19th May, 1997 was itself a contentious issue.",,

Ld. Single Judge has also observed that the property may have been demolished in the year 1997; that this fact was within the knowledge of the,,

plaintiff and that despite the fact that the plaintiff lost possession of its security in the year 1997, it kept silent till 2016 when the suit was filed. The",,

court has also found that the knowledge of the plaintiff of the subsequent transfers of the property to the various purchasers was a contentious issue.,,

Previous Year Ended 31-03-95,Liabilities,Current Year Ended 31-03-95

61,97,016.20",M/s Durga Builders Pvt. Ltd.,"65,03,339.20â€​

this aspect, the plaintiff has placed on record copy of a possession letter which was executed by Mr. R.K. Nanda on 19th May, 1997, which reads as",,

follows:,,

“Possession Letter,,

In consideration for an amount of Rs.65.00 lacs due to M/s. DURGA BUILDER PVT. LTD., we confirm having handed over possession of",,

property No.11, Lajpat Nagar-4, Ring Road, New Delhi along with necessary titles deed.",,

The complete, vacant space of over five thousand sq.ft., unencumbered peaceful possession and keys of the Basement and second floor is",,

hereby handed over to Mr. Arun Mehra at New Delhi, today.",,

HANDED OVER,,

Sd/-,,

Mr. R.K. Nanda,,

for Durga Housing & General Finance (P) Ltd.,,

TAKEN OVER,,

Sd/-,,

ARUN MEHRA,,

Witnesses:,,

Dr. Bhasin,,

Mr. Gauba. â€​,,

It is noteworthy that the above letter makes no reference to the creation of a mortgage. The same is also undated. It refers to no specific portions,,

of the property,,

Mr. Davinder Singh, ld. counsel for the plaintiff would contend that the date is mentioned on the backside of the document. A perusal thereof",,

shows that on the back of the document, only the date of the purchase of stamp paper is mentioned. The ld. Single Judge has noted this date as",,

‘19.05.1997’.,,

So far as the creation of the mortgage is concerned, in the plaint, which was filed on 20th September, 2016, we find the following contradictory",,

averments made by the plaintiff:,,

“1. ...... Plaintiff is a mortgagee by deposit of original title deed(s) as against the value of the entire sale consideration mentioned in the,,

title deed(s) of property in question i.e. Property No.11, Ring Road, Lajpat Nagar-IV (hereinafter referred to as the ‘suit property’),",,

New Delhi. Suit property was purchased on 08.11.1990 for a value of Rs.65,77,379/- (Rupees Sixty Five Lacs Seventy Seven Thousand",,

Three Hundred Seventy Nine Only) i.e. almost the same value for which mortgage was created. It is pertinent to note that Defendant No.1 on,,

19.05.1997 created a mortgage as indicated above and in order to further secure the plaintiff handed over possession of two floors in the,,

property (mortgage security), by executing a separate possession letter. In effect, plaintiff holds both the original title deeds as well as the",,

possession along with the possession letter towards the mortgage security of the amount so paid by it as a mortgagee.,,

xxx xxx xxx,,

8(b)...... It was thereafter that suit property was permitted to be purchased on 21.11.1990 by M/s Durga Housing & General Finance,,

Private Limited. That a mortgage by deposit of original title deeds and by giving possession of two floors (2nd floor and basement) was,,

created by the Defendant No.1 in favour of Plaintiff Company.â€​,,

(Emphasis supplied),,

This date does not tally with the dates of payment.,,

It is trite that consideration of an application under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure rests on three basic principles. The,,

Court would require an examination as to whether the plaintiff had made out a prima facie case in its favour; whether the plaintiff would suffer,,

irreparable loss and damage in case injunction was not granted; and whether the balance of convenience was in favour of the plaintiff.,,

In the present case, the plaintiff hopelessly fails to satisfy any of the three basic requirements entitling grant of injunction. So far as the plea of",,

equitable mortgage is concerned, we have found no disclosure at all of even the amount which was advanced by the plaintiff to the defendant no.1, the",,

date on which the same was paid or when became due and payable.,,

The plaintiff is unable even to give the date on which the equitable mortgage was created, let alone the specific terms thereof. It is important to",,

note that none of the terms of creation of the mortgage has been disclosed anywhere in the plaint. The plaint also does not make a statement as to,,

when the money which was allegedly advanced to the defendant no.1 became due and payable by it. There is a reference in para 25 of the plaint that,,

as on the date of filing of the suit, the amount due from the mortgage of the suit property is a total of Rs.65 lakhs along with interest @ 24% per",,

annum till the date of realization.,,

Our attention stands drawn to the proceedings before the Economic Offence Wing, the plaintiff refers to a report dated 29th March, 2016 of the",,

Economic Office Wing. The plaintiff has placed a copy of this report on the suit record as well as before us. This report makes a reference to a,,

“previous final reportâ€. This report has unfortunately not been placed on record by the plaintiff. However, a copy thereof appears to have been",,

filed on the suit record by the defendant no.6 as an annexure to the I.A. No.12871/2016 (under Order VII Rule 11 of CPC) filed by it, which is dated",,

16th May, 2013.",,

Being a document filed by a defendant, while we would stand precluded from considering it for the purposes of examining the prayer in",,

I.A.No.1287/2016 under Order VII Rule 11 C.P.C., we can certainly consider this report for examination of the plaintiff’s prayer for injunction by",,

way of I.A.No.11750/2016. This report was premised on investigation conducted by the Economic Offence Wing on the complaint made by DBP Ltd.,,

(plaintiff). Statements made in this report are relevant so far as the plea regarding possession is concerned. It has been stated as follows :,,

“..... However, on our further and persistent follow up, they started avoiding us. Recently in the month of September 2009, when we",,

visited the said Property No.11, Lajpat Nagar-4, Ring Road, New Delhi for inspection to our shock & surprise, we found the signboard of",,

one M/s Global School of Management Science displayed over there. On making enquiries, we came to know that M/s Global School of",,

Management Science have taken the property on lease from M/s Sonal Developers Pvt. Ltd., who had taken/purchased the said property",,

from M/s Durga Housing & Finance Ltd. On further inquiry from own sources we came to know that Mr. R.K. Nanda & Mrs. Promila,,

Nanda have illegally handed over/sold/transferred the aforesaid property to M/s Sonal Developers Pvt. Ltd. Thus the,,

agreement/arraignment entered into with us was violated. Mr. S.K. Modi, the Accused No.4 is the Director and key person of M/s Sonal",,

Developers Pvt. Ltd. and is the architect of the said illegal deal/transaction between Mr. R.K. Nanda & Mrs. Promila Nanda and M/s Sonal,,

Developers Pvt. Ltd. and all the accused persons were working in collision & conspiracy and in active connivance with each other.....â€​,,

(Emphasis supplied),,

At page 24 of the above report of the Economic Offence Wing, reference is contained to certain disputes between M/s Class Sales Pvt. Ltd. and",,

the plaintiff in the following terms:,,

“Several documents and reply in response to the allegations made in the complaint have also been obtained from the alleged persons. It,,

has been informed by the alleged R.K. Nanda (F/A) that he did not sign any agreement with M/s Class Sales Pvt. Ltd. He has further,,

informed that Mr. Arun Mehra, Director of M/s Class Sales P. Ltd. has been claiming that he had advanced some loan against some of the",,

plots and the plots were kept as security for the said loan. This fact was admitted hy him in WS filed by him being director Class Sales P.,,

Ltd. in suit No.961/2004. He has also claimed that no payments were received by M/s Durga Builders P. Ltd. from M/s Class Sales P. Ltd.,,

against sale of the plots in question. It has also been claimed that no documents were ever executed by M/s Durga Housing & Finance P.,,

Ltd. in favour of M/s Class Sales P. Ltd. in respect of property No.11, Lajpat Nagar-IV, Delhi and that the said property was sold sometimes",,

in the year 1999-2000.â€​,,

(Emphasis supplied),,

So far as the suit property is concerned, the Economic Offences Wing has stated thus:",,

“Regarding Claim Property No.11,,

The property bearing No.11, Ring Road, Lajpat Nagar-IV, New Delhi was owned by M/s Durga Housing and General Finance Pvt. Ltd. The",,

said company did not have any concern with Mr. Arun Mehra or any of his companies, including Class Sales Pvt. Ltd. and Hindustan",,

Commercial Investment Trust Limited. In fact the said property alongwith property bearing No.12, Ring Road, comprised of a huge",,

commercial complex, comprising of a number of shops, which were built and sold to the shopkeepers during 1992-93. The Municipal",,

Corporation of Delhi while taking demolition action on 10.11.1997 and 11.11.1997 demolished the entire commercial complex. The same,,

finds mentioned in the MCD, house Tax Assessment Order, the copy of which is annexed herewith. The said complex comprising of various",,

shops was sold to the Shopkeepers, much prior to Mr. Mehra’s entering into the agreement with me, R.K. Nanda, in the year 1997 (copy",,

of the agreement enclosed). When all the shops and structure were demolished by MCD, the shopkeepers wanted the refund of their money.",,

They identified a new buyer, with my consent and the property was sold to M/s Sonal Developers Pvt. Ltd. by executing a Sale deed, as the",,

said M/s Sonal Developers Pvt. Ltd. had refunded the entire money to the shopkeepers whose shops were demolished and the shopkeepers,,

surrendered all their claims in favour of M/s Sonal Developers Pvt. Ltd.â€​,,

(Emphasis by us),,

The proceedings and reports of the Economic Offence Wing are significant. Though the plaintiff has extracted portion of the report dated 26th,,

March, 2016 in the plaint itself, the plaintiff has consciously skipped the previous report dated 16th May, 2013 filed by the Economic Offence Wing",,

which has been placed by the defendant no.6 before the ld. Single Judge. In this report, the Investigating Officer has reported to the effect that the",,

suit property was demolished in its entirety by the Municipal Corporation of Delhi while taking demolition action on the 10th and 11th November, 1997.",,

It is further reiterated that this fact stands mentioned in the MCD House Tax Assessment order which was also annexed with the report.,,

According to the investigation conducted by the Economic Offence Wing, the entire suit property was demolished in the year 1997. Thus, the",,

property of which the plaintiff claims to have received possession from M/s DHAFB Ltd. appears to have been demolished. The plaintiff (or its,,

Directors), who claim to have been in possession of the property, would have been aware of the demolition of the suit property in the year 1997 if they",,

actually had an equitable mortgage in its favour of the suit property, which formed security therefrom or were ever in actual possession of any potion",,

thereof.,,

The above report of the Economic Offences Wing would show that the plaintiff became aware of the sale of the suit property in the year 1999.,,

No action stands taken either with regard to title or possession or demolition of the suit property.,,

We are informed by Mr. Saurabh Kirpal, ld. counsel for the defendant no.6 that the suit property in question was let out to one M/s Global School",,

of Management Science at the time of the first demolition in 1997 by the MCD and that in June, 2016, the suit property in question was being",,

demolished for the second time, at the instance of the defendant no.6.",,

Clearly, the plaintiff had failed to make out a prima facie case for grant of an injunction.",,

Defendant no.6 has staunchly opposed not only the grant of injunction, but also the maintainability of the suit on the ground of limitation.",,

It has been contended at length by Mr. Saurabh Kirpal that even if the glaring false information in the plaint was believed, the pleas in the plaint",,

and the documents relied upon by the plaintiff, clearly manifest that the suit has been filed hopelessly beyond the period of 12 years as envisaged",,

under Article 62 of the Schedule II of the Limitation Act, 1963 and is therefore, barred by limitation.",,

Article 62 of Schedule II of the Limitation Act, 1963 which prescribes the limitation to enforce a money claim premised on a mortgage or charge",,

Description of suit,Period of limitation,"Time from which period begins

in run

To enforce payment of money

secured by a mortgage or

otherwise charged upon

immovable property",Twelve years,"When the money sued for

becomes due.â€​