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Attorney(S)
  • Represented by: Mr. Sandeep Sethi, Sr. Advocate instructed by Mr. Deepak Jain, Mr. Pradeep K.B, Mr. Anil Kaushik, and Mr. Karthik Ashok, Advocates.
  • Represented by: Mr. P.D Gupta, and Mr. Kamal Gupta, Advocates for R-5.
  • Mr. Akhil Sibal, Advocate for R-6.
Judges
  • Pradeep Nandrajog
  • Manmohan Singh, JJ.
Acts
  • Order XXII Rule 3 CPC
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Citation Codes
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citation codes
Case Number
Attorney(S)
  • Represented by: Mr. Sandeep Sethi, Sr. Advocate instructed by Mr. Deepak Jain, Mr. Pradeep K.B, Mr. Anil Kaushik, and Mr. Karthik Ashok, Advocates.
  • Represented by: Mr. P.D Gupta, and Mr. Kamal Gupta, Advocates for R-5.
  • Mr. Akhil Sibal, Advocate for R-6.
Judges
  • Pradeep Nandrajog
  • Manmohan Singh, JJ.
Acts
  • Order XXII Rule 3 CPC
See more information ...
Smart Summary

Structured Summary of the Opinion — Pradeep Nandrajog, J.

Factual and Procedural Background

The plaintiff, late Smt. Sudesh Madhok, filed a suit seeking a decree for Rs. 1,31,07,607 alleging that in February 1996 respondents had sought discounting of a Bill of Exchange of Rs. 1,03,84,000; a demand promissory note for that amount was executed by respondent No.1 in her favour; respondent No.3 executed a deed of guarantee and other securities (pledge of shares and an irrevocable power of attorney). Payments and cheques issued in June 1997 were dishonoured. The plaintiff alleged that the flat bearing No. 10H, Vandana Building, Tolstoy Marg was secured by mortgage for repayment; the plaint sought principal, loss and pre-suit interest at 18% leading to the claimed Rs. 1,31,07,607.

The defendants (respondents No.1–4 and the appellant) filed a common written statement signed by Shri S.L. Maloo (a director of the companies) in which, by way of rolled-over pleadings, they stated that Flat No.10H had been sold to the plaintiff in full satisfaction of her claim (thus denying the mortgage allegation). The plaintiff filed a replication reiterating the plaint.

Procedural history highlights:

  • January 25, 1999 — injunction restraining transfer/alienation of the flat issued on issuance of summons.
  • November 24, 2004 — counsel for respondents (Neeraj K. Singh) stated the flat could be sold and proceeds paid to the plaintiff to satisfy her claim.
  • Plaintiff died before implementation; legal heirs were made parties and IA under Order XXII Rule 3 CPC was decided July 18, 2005.
  • The matter remained pending and was noticed by a Single Judge on November 11, 2010 who observed the November 24, 2004 statement needed implementation; the Single Judge found respondent No.1 to be a company declared ‘sick’ and that the flat could be sold as regards shares of respondents No.3, 4 and the appellant.
  • IA No.17384/2010 (legal heirs alleging violation of injunction and claiming the flat was in possession of N.V. Distilleries Ltd.) — S.L. Maloo directed to appear; he attended on April 1, 2011 and made conflicting statements including acknowledging signatures on title documents (Ex.P-13 and Ex.P-14) showing transfers to four companies on May 8, 1995.
  • September 20, 2011 — a learned Single Judge dismissed an application by S.L. Maloo to recall earlier orders.
  • October 19, 2011 — agreed order that the appellant would furnish a bank guarantee of Rs. 2.25 crores to preserve the property.
  • November 16 and December 1, 2011 — court considered and directed improvements to form of bank guarantee; the finalized guarantee unconditionally undertook to pay up to Rs.2,25,00,000 if suit was decreed and judgment debtors did not pay within stipulated time.
  • July 31, 2012 — learned Single Judge decreed the suit, but only for Rs.75 lakhs with interest @15% p.a. from 13.02.1996, and directed invocation of the bank guarantee to satisfy the decretal amount.
  • The present appeal was preferred by Defendant No.5 (M/s. Universal Finance Traders Ltd.) limited to the direction that the bank guarantee be invoked.
  • The appellate court dismissed the appeal, assessed costs of Rs.1,00,000 against the appellant in favour of respondents No.5 and 6, and requested the learned Single Judge to initiate appropriate proceedings for the perjury allegedly committed by S.L. Maloo.

Legal Issues Presented

  1. Whether the bank guarantee furnished by the appellant (defendant) could be invoked to satisfy the decretal amount pursuant to the orders passed in the suit (specifically the order of 1 December 2011 and the decree of 31 July 2012).
  2. Whether a decree could properly be passed on admission (i.e., given the written statement and subsequent pleadings/admissions regarding the flat) and the quantum of decree to be granted.
  3. Whether the appellant could avoid liability to the plaintiffs by relying on post-pleading changes in shareholding/management and a later claim of sole ownership of the flat (including reliance on an Agreement to Sell dated 29 July 1998 which was alleged to be fabricated).

Arguments of the Parties

Appellant's Arguments

  • The appellant claimed that the flat was the sole property of the appellant pursuant to an Agreement to Sell dated 29 July 1998 and that respondents No.1, 3 and 4 transferred their shares in the flat to the appellant on that date (i.e., the appellant asserted exclusive ownership since 29 July 1998).
  • The appellant asserted a change of shareholding on 13 February 2007 when seven named persons acquired 100% shareholding for a total consideration of Rs.37,50,000, and argued that with that change of management the appellant should not be held responsible for acts of the previous management.
  • The appellant pleaded in its own instituted suit (Suit No.1339/2012) that its liability under the bank guarantee was conditional — liability would arise only if the decree against respondents No.1 to 3 remained unexecuted — and contended that defendants No.1 to 3 were primarily liable and Defendant No.5 (the appellant) was not liable to provide bank guarantee to discharge defendants 1–3’s liability.
  • The appellant challenged the authenticity of the Agreement to Sell on which it relied, but the opinion records an investigation by the police that suggests the Agreement to Sell might be fabricated (e.g., notary who allegedly attested had died earlier).

Respondents' (Plaintiffs') Arguments / Contentions Noted by the Court

  • The plaintiffs relied on the fact that the defendants' written statement (signed by S.L. Maloo, director) effectively admitted that the flat had been transferred to the plaintiff in full and final satisfaction, or at least that the plaintiff had a mortgagee's interest — and in either case they could enforce the decree qua the flat.
  • The plaintiffs pointed to the November 24, 2004 statement (by defendants' counsel) that the flat could be sold and proceeds paid to the plaintiff, and to subsequent procedural orders, including the requirement that the appellant furnish a bank guarantee of Rs.2.25 crores to preserve the property.
  • The plaintiffs (and the learned Single Judge) treated the defendants' (including the appellant's) stance that the flat had been sold (not mortgaged) as a plea not permissible in law to defeat a decree on admission.
  • The plaintiffs relied on the wording of the court-approved bank guarantee (as finalized after 1 December 2011), which unconditionally undertook payment up to Rs.2.25 crores if the suit was decreed and judgment-debtors did not pay, to justify invocation of the guarantee to satisfy the decree.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court's reasoning proceeds in discrete, document-anchored steps:

  1. Admission and effect: The court emphasises that the plaintiff's claim was not denied in substance in the written statement because the defendants (through S.L. Maloo) pleaded that the flat had been transferred to the plaintiff in full and final satisfaction of the claim. The court observed that such a defence (asserting the flat was sold rather than mortgaged) was of a kind "not recognized by law" where immovable property transfer requires a sale deed, and therefore the claim could have been decreed on admission.
  2. Delay and procedural history: The court recounts delays (death of the plaintiff, replication of legal heirs, IA under Order XXII Rule 3, and inaction by the legal heirs to implement the November 24, 2004 order), and how the Single Judge ultimately realized the prior undertaking/declaration and proceeded to implement it.
  3. Statements and perjury: The court identifies conflicts between statements made by S.L. Maloo in court, his affidavit and his pleadings (including signatures on Ex.P-13 and Ex.P-14), describing certain sworn statements as "ex-facie perjured." The court further notes that applications by S.L. Maloo to recall earlier orders were rightly dismissed (September 20, 2011).
  4. Bank guarantee language and binding nature: The court analyses the agreed order of October 19, 2011 and the December 1, 2011 direction which required the bank guarantee to undertake payment up to Rs.2.25 crores "in the event of this suit being decreed and the judgment debtor(s) not paying the decretal amount." The finalized guarantee, on its face, unconditionally undertook to pay up to Rs.2.25 crores in those events. The court reasons that the terms of the order and the bank guarantee do not permit the appellant to resist invocation of the guarantee.
  5. Effect of change in management/shareholding: The court notes the appellant's contention of change of management/shareholding and argues that the appellant cannot escape the consequences of prior pleadings and court orders signed/bound by its then-director S.L. Maloo. The court points to the written statement signed by Maloo which included admissions and concludes the appellant is bound by those positions irrespective of subsequent changes.
  6. Quantum of decree: The Single Judge decreed the suit, but only to Rs.75 lakhs with interest at 15% from 13.02.1996. The court explains this reduced quantum by reference to the finding that the deceased plaintiff had paid Rs.1 crore and received Rs.25,00,000 as admitted — the math and reasoning being recorded by the Single Judge (the appellate opinion records the Single Judge's rationale).
  7. Fraud allegations and fabricated documents: The appellate opinion records that a police investigation revealed the Agreement to Sell (dated 29 July 1998) on which the appellant relied appears to be fabricated (e.g., notary allegedly dead before the date of attestation, stamp vendor fictitious). The court treats this as indicating a fraudulent device used to resist the decree.
  8. Conclusion on invocation: Given the admitted pleadings, the terms of the court order of December 1, 2011, the unconditional language of the finalized bank guarantee, and the appellant's own later pleadings (in its Suit No.1339/2012) which accept a condition of liability in materially similar terms, the court concludes that invoking the bank guarantee to satisfy the decretal amount was correctly directed by the Single Judge.

Holding and Implications

Holding:

APPEAL DISMISSED.

Direct consequences and practical effects:

  • The decree of the learned Single Judge (decreeing the suit for Rs.75 lakhs with interest @15% p.a. from 13.02.1996) stands as affirmed in this appeal.
  • The direction to invoke the bank guarantee furnished by the appellant (up to Rs.2.25 crores as per its terms) to satisfy the decretal amount is upheld.
  • Costs of the appeal are assessed against the appellant in favour of respondents No.5 and 6 in the sum of Rs.1,00,000/-.
  • The court requested that a copy of the order be placed in the suit file and that the learned Single Judge initiate appropriate proceedings in relation to the alleged perjury by S.L. Maloo.

Broader implications:

  • The opinion does not purport to lay down a new legal precedent; its reasoning is applied to the facts and the binding nature of the court's orders and the bank guarantee as executed. No new principle of law beyond the application of pleadings/admissions, the binding effect of court-ordered security, and the enforceability of an appropriately worded bank guarantee is announced in a manner stated as precedent in this opinion.

Note: This summary is derived exclusively from the provided opinion and does not add information beyond what the opinion contains.

Show full summary ...

    Universal Finance Traders Ltd. v. Lunar Diamonds Ltd. & Ors. S

    PRADEEP NANDRAJOG, J.

    1. Late Smt. Sudesh Madhok, the wife of respondent No. 5 and mother of respondent No. 6 had filed a suit praying for a decree in sum of Rs. 1,31,07,607.00 alleging that respondent No. 1, M/s. Lunar Diamonds Ltd., respondents No. 2, M/s. Lunar Gold International Pvt. Ltd., respondent No. 3, M/s. Lunar Finance Ltd., respondent No. 4, M/s. Sunrise Securities Ltd. and the appellant were Public Limited Companies. In February 1996, respondent No. 2 requested her to discount a Bill of Exchange in sum of Rs. 1,03,84,000/- drawn on respondent No. 1 for a consideration of Rs. 1,00,00,000/- and she agreed. Simultaneously, respondent No. 1 executed a demand promissory note in her favour in sum of Rs. 1,03,84,000/- and respondent No. 3 executed a deed of guarantee in her favour. Additionally, respondent No. 3 executed and delivered a pledge agreement as also an irrevocable power of attorney in her favour pledging shares worth Rs. 4 lakhs of respondent No. 4 to her. Paying Rs. 25 lakhs to her, respondent No. 1 issued two cheques in sum of Rs. 78,84,000/- and Rs. 2,75,971/-, the latter towards interest to liquidate the liability in June 1997. The cheques were dishonoured. She pleaded that Flat No. 10H, Vandana Building, Tolstoy Marg was later on secured by way of a mortgage for repayment of debt to her by the appellant and respondents No. 1, 3 and 4. Stating that Rs. 81,59,871/- towards the cheque amounts was due to her and that she had suffered loss in sum of Rs. 10,00,000/- and pre-suit interest @18% per annum total Rs. 39,47,636/-, decree claimed by her was in sum of Rs. 1,31,07,607/- with interest @18% per annum till amount was received.

    2. A common written statement was filed on behalf of the respondents No. 1 to 4 and the appellant under the signatures of Shri S.L Maloo, who has not disclosed in the written statement as to in what capacity he was signing and verifying the pleadings and filing the same on behalf of the defendants. But admittedly was a director in all the companies. In a rolled over pleadings in the written statement, which have to be treated as an admission of the claim in the suit, it stands pleaded that in complete satisfaction of the claim of the plaintiff Flat No. 10H, Vandana Building, Tolstoy Marg was sold to the plaintiff. In other words, the plea of the plaintiff that the flat was mortgaged to her was denied and the stand taken was that the flat was sold to her.

    3. In the replication filed, Smt. Sudesh Madhok reiterated the stand taken in the plaint.

    4. On January 25, 1999 while issuing summons in the suit, respondents No. 1 to 4 and the appellant were restrained from transferring, selling or alienating Flat No. 10H, Vandana Building, Tolstoy Marg.

    5. The suit thereafter chartered a course, which is reflective of a disinterested plaintiff and disinterested defendants.

    6. The claim of Smt. Sudesh Madhok not being denied in the written statement and the defence being that Flat No. 10H, Vandana Building, Tolstoy Marg was transferred to her in full and final consideration of her dues, and Smt. Sudesh Madhok denying as aforesaid, had anybody drawn the attention of the Court to the fact that immovable property valued at more than Rs. 100/- can be sold only by a sale deed and thus the defence was of a kind which was not recognized by law, a decree could have followed on admission. But it never happened till when the impugned order was passed.

    7. Respondent No. 1 became a sick company and rather than stay the suit qua said respondent, the suit got stayed, but later on got revived. Stage of settling issues reached when on November 24, 2004 Mr. Neeraj K. Singh, learned counsel for respondents No. 1 to 4 and the appellant made a statement that Flat No. 10H, Vandana Building, Tolstoy Marg, which was given as security to secure the amount due to Smt. Sudesh Madhok, could be sold and amount realized could be paid to Smt. Sudesh Madhok in satisfaction of her claim by way of adjustment.

    8. But before the order could be implemented, Smt. Sudesh Madhok died. Her legal heirs were brought on record and time was consumed till IA No. 4675/2005 under Order XXII Rule 3 CPC was decided. This happened on July 18, 2005. Unfortunately, counsel for the legal heirs of Smt. Sudesh Madhok never informed the Court that order dated November 24, 2004 had to be implemented. The matter simply lingered on, and on, and on, and on, till a learned Single Judge realized on November 11, 2010 that the order dated November 24, 2004 had to be implemented.

    9. Simultaneously realizing that respondent No. 1 was a company declared ‘Sick’ by the Board of Industrial and Financial Reconstruction, as recorded in the order dated November 11, 2010, the learned Single Judge noted that the flat in question could be sold as regards the share of respondents No. 3 and 4 and the appellant.

    10. Suffice would it be to state that as per the title documents, the flat in question belongs to the appellant and respondents No. 1, 3 and 4.

    11. The legal heirs of late Smt. Sudesh Madhok were constrained to file IA No. 17384/2010 informing the Court that the flat in question which was hithertofore lying locked was in possession of N.V Distilleries Ltd. with interior works being executed and it was learnt that the appellant and respondents No. 1, 3 and 4, acting through S.L Maloo had sold the flat. Alleging violation of the injunction, it was prayed that Shri. S.L Maloo be directed to remain present in Court. On December 22, 2010 it was directed by the Court that Sh. S.L Maloo should remain present in Court. He appeared in Court on April 01, 2011 and made a statement that the appellant was in exclusive possession of the flat since it was purchased by the appellant directly from the promoters. But surprisingly he simultaneously admitted that the document Ex.P-13, which we note is a deed acknowledging transfer of Flat No. 10H, Vandana Building, Tolstoy Marg, from the original allottee Amrit Lal Bajaj in favour of the four companies Lunar Finance Ltd., Lunar Diamond Ltd., Sunrise Securities Ltd. and Universal Finance Traders Ltd. bore his signatures. Indeed, Ex.P-13 reveals that on May 08, 1995 the original allottee Amrti Lal Bajaj transferred the flat in the name of the four companies and the builder M/s. Gee Vee Construction Ltd. acknowledge said fact. We also note that Ex.P-14 which is the allotment document pertaining to the flat in favour of Amrit Lal Bajaj records a transfer of the allotment in favour of the four companies and even this bears the signatures of Sh. S.L Maloo.

    12. It is unfortunate that a statement made on oath by Sh. S.L Maloo which is ex-facie perjured, went unnoticed by the learned Single Judge.

    13. The flat in question could not be sold inasmuch as it became difficult to take possession of the flat in question. Sh. S.L Maloo was directed to remain present in Court. He played truants. Costs had to be imposed upon him to secure his presence. Praying that order dated November 24, 2004 and April 01, 2011 be recalled, Sh. S.L Maloo filed IA No. 12772/2011 in which he pleaded:-

    “That the defendants had engaged Sh. Neeraj K. Singh, Advocate as their counsel to appear in the aforesaid matter and to defend as per instructions given to the said counsel. It is submitted that the instructions as given to the counsel were that property/flat bearing No. 10H, Vandana Building, Tolstoy Marg, New Delhi was never mortgaged with the plaintiff as security for repayment of the loan amount, the defendant No. 1 had only offered two properties including the property in question but the plaintiff never agreed to have flat bearing No. 10H, Vandana Building, Tolstoy Marg, New Delhi towards discharge of the liability, because it also required to have consent of co-sharers/actual owners of the property by way of resolution.”

    14. We highlight that this stand is at complete variance with the written statement filed under the signatures of Sh. S.L Maloo, in para 6 whereof, it is specifically pleaded:-

    “The defendant No. 1 offered two properties i.e Property No. 15A/30A WEA Karol Bagh New Delhi or the property bearing Flat No. 10H, Vandana Building, Tolstoy Marg, New Delhi and the plaintiff agreed to have the property bearing Flat No. 10H, Vandana Building, Tolstoy Marg, New Delhi and in view of that, complete liability has been discharged.”

    15. It is apparent that Sh. S.L Maloo has no regards for truth and perjures himself at his convenience, regretfully even this perjured statement made by Sh. S.L Maloo in his pleadings, supported by an affidavit on oath was ignored by the learned Single Judge.

    16. The application was rightly dismissed by the learned Single Judge as per order dated September 20, 2011.

    17. Matter had to proceed for the flat to be sold when an agreed order came to be passed on October 19, 2011 and we highlight that the order records that the appellant was represented through Mr. Dinesh Agnani, Sr. Advocate and instructed by Mr. Anurag Chawla, Advocate. Shri S.L Maloo was represented by Mr. Madan Gera, Advocate. It was agreed by the appellant that to preserve the property i.e Flat No. 10H, Vandana Building, Tolstoy Marg, New Delhi it would furnish a bank guarantee in sum of Rs. 2.25 crores to the satisfaction of the learned Joint Registrar.

    18. The appellant thereafter sought permission to mortgage Flat No. 10H, Vandana Building, Tolstoy Marg, New Delhi to obtain a bank guarantee. As per order dated November 16, 2011 the necessary permission was granted. The proposed bank guarantee was considered by the Court and its language was found to be deficient. Order dated December 01, 2011 was passed as under:-

    “I have perused the bank guarantee furnished by defendant No. 5. The bank guarantee is not appropriately worded. In my view, the bank should undertake to pay a sum up to Rs. 2,25,00,000/- to the Registrar General of this Court, in the event of this suit being decreed and the judgment debtor(s) not paying the decreed amount within such time as the Court may stipulate for the purpose…….”

    19. Thereafter the bank guarantee was filed. And we note the terms of the guarantee records that the bank unconditionally undertakes to pay up to a sum of Rs. 2,25,00,000/- in the event of the suit being decreed and the judgment debtors not paying the decretal amount.

    20. Suffice would it be to state that in this manner, the defendants in the suit, which includes the appellant, managed that the flat in question would not be sold.

    21. Fortunately for the plaintiffs i.e respondents No. 5 and 6 in the appeal, the learned Single Judge held, vide order dated July 31, 2012 that it was a case where decree had to be passed on admission. The reason is the one which we have noted in paragraph 6 above i.e that the claim in the suit has not been denied and the defence that Flat No. 10H, Vandana Building, Tolstoy Marg, New Delhi was sold and not offered by way of mortgage was a plea not even permissible to be raised as per the law.

    22. Decreeing the suit but only in sum of Rs. 75 lakhs and granting interest @15% per annum from February 13, 1996, and for which reasoning of the learned Single Judge is that late Smt. Sudesh Madhok had paid a sum of Rs. 1 crore and had received Rs. 25,00,000/- as admitted by her. The learned Single Judge simultaneously directed that the bank guarantee be invoked to satisfy the decretal amount and for which the learned Single Judge held that the language of the bank guarantee so permits.

    23. Defendant No. 5 of the suit, M/s. Universal Finance Traders Ltd. has preferred the appeal limited to the direction in the order dated July 31, 2012 that the bank guarantee be invoked.

    24. And the plea taken is that the flat in question was the sole property of the appellant as per an Agreement to Sell dated July 29, 1998 and that the shareholding of the appellant company had totally changed hands on February 13, 2007. It is pleaded in the appeal that all the shares of the appellant have been purchased by Varun Jain, Vineeta Jain, Neha Gupta, Indra Jain, Ashok Jain, Vimal Goel, and Sameer Goel for a total consideration of Rs. 37,50,000/-. With respect to the history to the title of Flat No. 10H, Vandana Building, Tolstoy Marg, New Delhi it was pleaded that M/s. Gee Vee Enterprises, the builder transferred the ownership to Amrit Lal Bajaj who thereafter transferred the same to the appellant and respondents No. 1, 3 and 4 and subsequently on July 29, 1998, respondents No. 1, 3 and 4 transferred their share to the appellant. The said seven persons acquired 100% shareholding of the appellant and leased the property to a group company called N.V Distilleries Ltd. vide lease deed dated July 1, 2008. It is pleaded by the appellant that Shri S.L Maloo was the director of the appellant only till July 03, 2007.

    25. In other words, what the appellant claims is that with the change of shareholding, the appellant would not be responsible for the acts of the previous management and additionally that the flat in question was the property of the appellant since July 29, 1998 and that the pleadings in the plaint that respondents No. 1, 3 and 4, apart from the appellant, were the co-owners of the flat is incorrect.

    26. It needs to be highlighted that admittedly the only asset of the appellant as of February 13, 2007, when the alleged share transfer took place was Flat No. 10H, Vandana Building, Tolstoy Marg, New Delhi and certainly its value was much more than Rs. 37,50,000/- i.e the price at which the shares of the appellant were purchased. There were no liabilities of the company save and except the amount claimed in the suit. It is impossible to believe, and he who believes is bound to be a person ignorant of the law pertaining to valuation of shares of an unlisted company, that the shares of the company would be sold for Rs. 37,50,000/- and thereby affecting the transferring the ownership rights of the flat valued at Rs. 5 crores. On the fact of it the so called share transfer is a device adopted by Sh. S.L Maloo and Varun Jain, Vineeta Jain, Neha Gupta, Indra Jain, Ashok Jain, Vimal Goel, and Sameer Goel are his cahoots. Interestingly, as pleaded by the appellant, it has leased the flat on July 01, 2008 and on expiry of the lease in June 2011 has re-let the same. Interestingly the duration of the new lease is 30 years. And what is the monthly rent? Rs. 11,000/- per month.

    27. We need not comment. The fraud is apparent. But we have something more to say. When the appellant set up a claim as aforesaid, and since the police is investigating the affairs of Sh. S.L Maloo, who has cheated many others, it has transpired, as per investigation conducted by the police that the Agreement to Sell on which the appellant relies i.e Agreement to Sell dated July 29, 1998 is a fabricated document inasmuch as Mahavir Singh, the Notary Public who has ostensibly attested the document i.e the Agreement to Sell on July 29, 1998 had expired prior thereto on May 02, 1997. The name of the person mentioned as the stamp vendor on the stamp paper on which the document is scribed is a fictitious person inasmuch as no person by said name exists, much less was ever a stamp vendor.

    28. Mr. S.L Maloo thinks he can pull wool over the eyes of the Court. He is a fool to so think.

    29. The appellants do not deny that Mr. S.L Maloo was a director of the appellant till July 2007. In the written statement filed on behalf of all the defendants, which included the appellant; signed by Sh. S.L Maloo (its director) it is clearly pleaded that Flat No. 10H, Vandana Building, Tolstoy Marg, was given to Smt. Sudesh Madhok in full and final satisfaction of her claim. The lady asserts that the flat was mortgaged to her. In either circumstance the appellant would be bound by the fact that whether the flat would be treated as the property of Smt. Sudesh Madhok, as per the defence, or she had a mortgagee's interest therein, she would be entitled to enforce the decree qua the flat. Now, orders have already been passed in the suit that the flat had to be sold. To prevent the sale, appellant has agreed that it would offer a bank guarantee. Order dated December 01, 2011, contents whereof have been noted by us in paragraph 18 above, clearly records: ‘In my view, the bank should undertake to pay a sum up to Rs. 2,25,00,000/- to the Registrar General of this Court, in the event of this suit being decreed and the judgment debtor(s) not paying the decreed amount within such time as the Court may stipulate for the purpose……’. The bank conforms to the aforesaid and thus the learned Single Judge on the terms of the guarantee has correctly directed the guarantee to be invoked.

    30. In fact, the order dated December 01, 2011 and the terms of the bank guarantee do not even permit the appellant to urge to the contrary. We need to highlight that when order dated December 01, 2011 was passed the new management of the appellant was in place and had engaged new counsel to defend the suit.

    31. That apart, we see no scope for the appellant to urge anything to the contrary in view of the fact that the appellant has instituted a suit registered as Suit No. 1339/2012 in which the appellant has itself pleaded, and correctly so, that its liability to pay under the bank guarantee is upon the condition that the decree passed against respondents No. 1 to 3 remains unexecuted. We highlight that in para 29 of the plaint filed by the appellant, in which it has sought the relief of being declared the owner of the flat in question and a decree that defendants No. 1 to 9 be directed to furnish a bank guarantee in its favour in sum of Rs. 2.25 crores, it has been pleaded:-

    “29. That it is the liability of Defendants 1 to 3 to pay Smt. Sudesh Madhok as the loan transaction was between them and the averments and prayer in CS(OS) No. 154 of 199 is also for seeking a decree for a sum of Rs. 1,31,07,607.00 along with interest against Defendant No. 1 to 3. No relief has been claimed against Defendant No. 5 i.e the Plaintiff herein. Hence it was not the Plaintiff, but the Defendants No. 1 to 3 who were liable to provide Bank Guarantee to the tune of Rs. 2.25 Crores. The Plaintiff is entitled to recover the expenses incurred by it in obtaining the bank guarantee in order to secure the Flat, for no fault of its. The Plaintiff is made to suffer only because of the fraud played by Defendants No. 1 to 9 by not disclosing the pendency of the litigation involving the Flat. In the interest of justice, it is necessary that the interest of the Plaintiff herein is also secured since the Plaintiff was directed to produce Bank Guarantee in order to save the Flat from being auctioned despite the fact that Plaintiff is not liable to discharge the liability of Defendants No. 1 to 3 towards Smt. Sudesh Madhok for the amount due to her. Hence it is necessary that Defendants No. 1 to 9 be directed to provide a Bank Guarantee or any other appropriate security to secure the interest of the Plaintiff so that if CS(OS) No. 154 of 1999 is decreed and Defendants No. 1 to 3 fail to pay the decretal amount and the bank guarantee produced by the Plaintiff is invoked, the interest of the Plaintiff is secured.”

    32. The appeal is dismissed. Costs assessed in favour of respondents No. 5 and 6 and against the appellant in sum of Rs. 1,00,000/-.

    33. Copy of this order be placed in the suit file, and we would request the learned Single Judge to initiate appropriate proceedings pertaining to the perjury committed by Sh. S.L Maloo.

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    Comments

    Universal Finance Traders Ltd. v. Lunar Diamonds Ltd. & Ors. S
    (Sep 17, 2012)