IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CHAMBER SUMMONS NO.993 OF 2017
EXECUTION APPLICATION NO.765 OF 2015
AWARD NO.83 OF 2014
Fullerton India Credit Company Ltd …Applicant
In the matter between
Prithipal S Chadha …Claimant
Jitenderpal Singh Chadha …Respondent
Mr Mayur Khandeparkar, with Vikas Salvi, Sanjay Dubey, I/b Vikas Salvi & Associates, for Applicant.
Mr Rajneesh Agrawal, i/b Meghnath N & SH Bohra, for Decree Holder.
Mr Prithipal S Chadha, Claimant, present.
Mr Jitenderpal Singh Chadha, Respondent, present.
Mr Toraskar, Section Officer of Court Receiver Present.
CORAM: G.S. PATEL, J
DATED: 12th February 2018
1. There is an error in the order dated 5th February 2018. In paragraph 1, line 2 the words “no party” are to be deleted.
2. There is some something very rotten in the state of our commercial litigation. It is exemplified by this case. If ever there was an example of a commercial fraud and a fraud on the Court, this is it.
3. I have before me a Chamber Summons No.993 of 2017 by one Fullerton India Credit Company Ltd, (“Fullerton”). It seeks to raise an attachment on Flat No. C-12, Cenced Apartment, 318, Union Park, Pali Hill Road, Khar (West), Mumbai 400 052. Fullerton says that it is a secured creditor of the Respondent, Jitenderpal Singh Chadha (“Jitenderpal”). The flat was mortgaged to Fullerton as security for the repayment of a loan of Rs.9,06,85,020/- sanctioned by Fullerton under a sanction letter dated 30th July 2014 in favour of one Tornado Motors Pvt Ltd (“Tornado”). Jitenderpal was the co-borrower. He offered this flat as security. Fullerton found from the society that the flat was already mortgaged to IndiaBulls Housing Finance Limited on 26th March 2013. Part of the loan amount sanctioned by Fullerton was thus agreed to be paid to IndiaBulls to release its claim, charge and mortgage on the flat. Fullerton and Jitenderpal executed a facility agreement dated 31st July 2014. As part of this, an amount of Rs.4,06,02,793/- was paid to IndiaBulls in redemption of the mortgage. A copy of the facility agreement is annexed. IndiaBulls executed a registered Deed of Reconveyance dated 20th August 2014 with the Respondent. It released its charge, lien and mortgage on the flat. This document is registered. On 20th August 2014, Jitenderpal executed a Deed of Simple Mortgage in favour of Fullerton. This deed was registered on the same date with the Sub- Registrar of Assurances, Andheri.
4. Tornado Motors and Jitenderpal defaulted in repayment of Fullerton’s loan. Fullerton initiated measures under the SARFAESI Act 2002 and in the course of that applied to the Chief Metropolitan Magistrate under Section 14(2) of the SARFAESI Act for an order of forcible possession.
5. It is at this stage that the Respondent, Jitenderpal, appeared and filed an application before the CMM saying there was an Arbitral Award of 6th November 2014 against him in favour of the Claimant, Prithipal Surenderpal Chadha (“Prithipal”). The CMM was told that Prithipal had put that award into execution by Execution Application Nos.765 of 2015 in this Court and obtained an order of 27th April 2016 (KR Shriram J) in Chamber Summons No.1468 of 2015, by which the Court Receiver was appointed of the flat. The CMM was told that the flat was thus in custodia legis with this Court, and therefore no order of possession ought to be passed.
6. But who is this Prithipal Surendersingh Chadha? As it turns out he is none other than Jitenderpal’s father-in-law. As if that is not convenient enough, let us have look at the award itself and what it is that Prithipal says he obtained against his son-in-law. A copy of the so-called award is annexed at Exhibit “F” to the Affidavit in Support of the Chamber Summons at page 66. The Arbitrator was, to my very great dismay, an Advocate of this Court, against whom I propose to issue notice quite separately for his role in what followed. The award is so astonishing and so utterly remarkable in what it set out to do, and actually did, as an entirely pre-planned exercise to perpetrate a fraud on the Court, that I can do better than quote the first two paragraphs of it.
“1. One Mr Prithipal Surindershingh Chadha, adult, Indian habitant, aged 60 years, residing at Pratap Kutir, 16th Cross Road, Khar, Mumbai 400 052 (hereinafter referred as ‘Claimant’ for sake of brevity), by his letters dated 4th November 2014 had forwarded me a copy of the agreement dated 4th November 2014 entered into between him on one hand and Mr Jitenderpal Singh Chadha, Indian habitants, (aged about 35 years), staying at C/12, Cenced Apartment, 318, Union Park, Pali Hill Road, Mumbai 400 052 (hereinafter referred as ‘Respondent’ for sake of brevity) on the other hand with specific request that the said letters forwarded by them to me may be treated as a reference. A careful perusal of the said agreement shows that the parties to the said agreement have made specific arrangement for referring the matter to Arbitration as per The Arbitration and Conciliation Act, 1996. I am satisfied that under the said agreement, I am entitled to entertain the said reference in respect of the dispute between Mr Prithipal Surendersingh Chadha on one hand and Mr Jitenderpal Singh Chadha, on other hand as all the parties have accepted and appointed me as an Arbitrator to resolve the dispute and accordingly I proceed to entertain the said References.
2. As could have been seen from the Reference made by Claimant, it is his contention that he had advanced an amount of Rs.1,30,00,000/-, Rs.60,00,000/-, Rs.35,00,000/- and Rs.55,00,000/- aggregating to Rs2,80,00,000/- (Rs. Two crores eighty lakhs only). The Claimant handed over a cheque for Rs.1,30,00,000/- and made RTGS for Rs.60,00,000/- on or about 27th September 2012. Further, the Claimant handed over cheques along with RTGS form for Rs.35,00,000/- and Rs.55,00,000/- for making RTGS in favour of the Respondent on or about 3rd November 2014. All the above payments were made by the Claimant to the Respondent as advance/in anticipation of delivery/sale of flat no. C/12, Cenced Apartment, 318, Union Park, Pali Hill Road, Mumbai 400 052 (hereinafter it may be referred as ‘Said Flat’ for sake of brevity) being to the Respondent for total consideration amount Rs.9.80 crores.”
7. What this tells us is: (i) this so-called claim of specific performance by Prithipal against his son-in-law Jitenderpal was supposedly an oral agreement for sale of the flat, and it is of this that specific performance was sought before the arbitrator; (ii) The Arbitrator, Advocate Parab, was persuaded to act on the basis of a letter of 4th November 2014, which apparently references the oral agreement also conveniently said to be dated 4th November 2014; (iii) It is alleged that some payment was made on 27th September 2012 but the most recent payment was the day before the so-called agreement, viz., on on 3rd November 2014; (iv) The total consideration was, and this cannot be a coincidence, an amount of Rs9.80 Crores, roughly the amount of Fullerton’s loan to begin with.
8. It does not end at that. The Award was made on 6th November 2014, i.e. precisely two days later; two days after the so- called agreement of 4th November 2014. It appears that this award was rendered on stamp paper of 29th September 2014 obtained by Advocate Parab. The operative portion of the award says that Jitenderpal was to pay an amount of Rs.3,94,48,954/- to his father- in-law with interest at 24% compounded monthly (itself utterly extraordinary), and, in default, the very flat in question was to be transferred to the name of the Jitenderpal’s father-in-law —without payment of the balance consideration. Then clause (c) made a wholly untenable direction of attachment and sale of the flat and clause (d) created a charge over it in favour of the Prithipal, the Claimant, while clause (e) granted the decree for specific performance and clause (f ) granted a restraint.
9. This duo of father-in-law and son-in-law then come together to this Court, when Prithipal filed Execution Application No.765 of 2015 and also filed a Chamber Summons in that Execution Application, Chamber Summons No.1468 of 2015. Prithipal moved this Chamber Summons before KR Shriram J on 27th April 2016 inter alia seeking the appointment of the Receiver in Execution. Father-in-law and son-in -law were careful to arrange separate legal representation. Jitenderpal, the son-in-law, through his counsel blithely and promptly told the Court that he was in financial difficulty, that the flat had already been attached and therefore persuaded the Court to grant the reliefs in the Chamber Summons. This was allowed. This is prayer clause (a) of the Chamber Summons:
“(a) that this Hon’ble Court be pleased to appoint Court Receiver, High Court, Mumbai as Receiver of the property viz. Flat No.C/12, Cenced Apartment, 318, Union Park, Pali Hill Road, Bandra (West), Mumbai 400 052 and all other attachable there at and more particularly set out in the above Execution Application with power to take possession thereof from Respondent, if required and to hand over the same to the Claimant and/or to such person as this Hon’ble Court may deem fit and proper as agent of the Court Receiver, High Court, Bombay;”
10. I have the record of the Chamber Summons with me and there is no Affidavit in Reply. In short, the son-in-law submitted to an order of appointment of the Receiver in a Chamber Summons filed by his father-in-law in respect of this very flat.
11. It is beyond all doubt that the entire process of invocation of Arbitration on a non-existent so-called oral agreement and obtaining, within one day, a reference to Arbitration, a hearing before the Arbitrator, and, within two days, an Arbitral Award, and then promptly obtaining an appointment of the Receiver, all had one and only one objective: to prevent Fullerton from recovering its dues. There was no other purpose.
12. In pursuing this objective, the process of this Court has been thoroughly comprised and corrupted. This is in its most flagrant and blatant form inference with the administration of justice.
13. All manner of submission are attempted today, including telling me that Fullerton has an understanding with Tornado Motors. Then Mr Agrawal for the Claimant, Prithipal, with the same alacrity that his son-in-law displayed in consenting to the flat going into Receivership, agrees to that very order — one that he sought on the ground that the flat needed to be protected — being vacated. This is nothing but playing ducks and drakes with the Court and its processes.
14. I asked Mr Agrawal if the Claimant client was in Court. Indeed he was. Then I asked if the Respondent was in Court since it was the Respondent, Jitenderpal, who had made a statement to Shriram J. I was told he was not in Court. I asked them if he was just outside Court in the corridor. Indeed he was. The Claimant stepped out and, in a few minutes, returned with his son-in-law in tow.
15. I will first allow this Chamber Summons immediately in terms of prayer clause (a), (b) and (c) which reads thus:
“(a) That this Hon’ble Court may be pleased to raise the warrant of attachment levied on mortgaged property namely Flat No.C/12, Cenced Apartment, 318, Union Park, Pali Hill Road, Khar (West), Mumbai 400 052; (b) That this Hon’ble Court be pleased to discharge the Court Receiver appointed in Chamber Summons No.1468 of 2015 in Execution Application No.765 of 2015, without passing the accounts, but subject to payment by Claimant and Respondents of such charges as may be applicable, to the Court Receiver; (c) The Court Receiver be directed to hand over possession of the mortgaged property namely C/12, Cenced Apartment, 318, Union Park, Pali Hill Road, Khar- West, Mumbai 400 052, to the Applicants herein;”
16. I will now go further. The Registry will issue Suo Motu Notice under Rule 9(1) of the Contempt of Courts (Bombay High Court) Rules, 1994 to the Claimant, Prithipal S Chada, the Respondent Jitenderpal Singh Chadha and the Advocate Mr Dattatray R Parab, B/301, Greenwoods CHSL, Chikoo wadi, Shimpoli Link Road, Boriwali (West), Mumbai 400 092, returnable on 12th March 2018 on the supplementary board, each to show cause why they should not be proceeded against and punished for having committed contempt of Court.
17. Mr Parab will also required to show cause why a recommendation should not be made to the Bar Council Maharashtra and Goa to have his name struck off the rolls for his involvement in this matter and for having made and published a thoroughly fraudulent and collusive award.
18. Since prayer clause (c) has been granted there is no reason to request the Magistrate to take further action.
19. The Court Receiver will proceed to deliver vacant possession of the flat and will eject Jitenderpalsingh Chadha from it. He will do so in the next 48 hours by 5.00 p.m. tomorrow 13th February 2018. The local police authorities at Pali Hill / Khar will render the necessary police assistance to the Court Receiver and they will act on production of an authenticated copy of this order.
20. At this stage, Jitenderpal Chadha, who, as I have noted, is now personally present in Court, undertakes that he will vacate the flat by 5.00 p.m. on 14th February 2018. This statement is accepted as an undertaking to the Court. The Court Receiver will stay his hands until 5.00 p.m. on that day. If possession is not delivered to the Applicant, Fullerton India Credit Company Ltd, through its representatives on that date, the Receiver will proceed to physically evict the Respondent and deliver vacant possession to Fullerton.
21. Finally the Registrar ( Judicial-I) will separately place a report by 12th March 2018 indicating as to what, in these circumstances, possible criminal action can be initiated by the Registry against the Claimant and the Respondent. Whether any criminal proceeding are to be taken against the Advocate Mr Parab will be decided on the next date.
22. I will note that Mr Khandeparkar for the Applicant has drawn my attention to certain decisions. The first is Ramesh Kumar & Anr v Furu Ram & Anr, 1 in which the Supreme Court says that where an award is collusive, bogus and not genuine, the Court will not and cannot make it a rule of the Court. He also draws my attention to the decisions of BN Srikrishna J (as he then was) in SBI Home Finance Ltd v Credential Finance Ltd & Ors, 2 on the question of whether a separate suit is required in a situation like this. Referencing Section 53 of the Transfer of Property Act 1882 regarding fraudulent transfers, Srikrishna J held that where title has been obtained by fraud, it is ineffectual. It was not necessary to file an independent suit for this purpose.
23. Finally, there is that long line of judgments that includes AV Papayya Sastry & Ors vs Government of AP & Ors3 regarding the conduct of expected by Courts of litigants. This is now too well- known to merit repetition. This case falls squarely within those parameters. A party who defrauds a court will be dealt with swiftly and without remorse or mercy. Mr Khandeparkar says this is increasingly a trend. That is shameful, and it is unforgivable. Certainly this is a case that, as I said at the beginning, has the reek of collusion and the stench of ‘playing the system’ to orchestrate a fraud to defeat a secured creditor. This Court — and by that I do not just mean myself, but this High Court — will not for a moment countenance it.
24. List the matter for compliance on 15th February 2018.
(G. S. PATEL, J)
1 (2011) 8 SCC 613.
2 AIR 2001 Bom 179.
3 (2007) 4 SCC 221.