Indian Bank v. Deepak Fertilisers & Petrochemicals Corporation Ltd. & Ors.

In a suit which is set out for an exparte decree, defendant No.1 has taken out the present Notice of Motion for dismissal of the suit against it by condoning the delay in taking out the Notice of motion. In the alternative, it seeks permission to file written statement to defend the suit. The Notice of Motion has been taken out in view of the events that occurred subsequent to filing of the suit.

In January 1980, defendant No.1 had invited offers from public including Non Resident Indians (NRIs) to subscribe to 14% convertible debentures of Rs.100/- each and had received

applications from 36 NRIs through defendant No.6. In the month of December 1990, the plaintiff lodged with defendant No.1 7,57,800 debentures for transfer along with transfer forms. Out of those debentures, defendant No.1 transferred 4,16,225 debentures in the name of the plaintiff, returned 3,575 debentures as under objection and retained balance 3,38,000 debentures for verification in view of discrepancies in the information stated in the transfer forms. Basavraj G. Patil

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It was later learnt that some of the retained debentures had become subject of a fraudulent act. This was communicated to defendant No.1 by Bank of Oman. It asked defendant No.1 not to proceed to give effect to the transfer. Defendant No.1 then immediately communicated the information to the Bombay Stock Exchange and other authorities. Thereafter the plaintiff approached Bombay Stock Exchange for its intervention and with the good offices of the Bombay Stock Exchange, Memorandum of Understanding dated 26th December 1990 was executed. Thereunder, the plaintiff obtained fresh transfer deeds along with “No objection” letters from some of the NRIs duly verified either by Indian Consulate General or notorized by a Notory Public. With submission of fresh transfer deeds, 1,64,000 Part “C” debentures came to be transferred to the plaintiff leaving 1,28,000 debentures. The plaintiff then filed company petition No.120 of 1991 against defendant No.1 for non-registration of the transfer of debentures in the name of the plaintiff. Pursuant to the ad-interim order passed in the petition, transfer of further 36,000 debentures came to be effected in favour of the plaintiff leaving 1,28,000 debentures.

Out of the balance 1,28,000 debentures 92,000 debentures had been placed in embargo by the Enforcement Directorate Bombay suspecting possible FERA violations in respect of subscription to the debentures through defendant No.6. By its letter dated 29th November 1991, it had directed defendant No.1 not to give effect to the transfer of 92,000 debentures and deposit interest/dividend with the Enforcement Directorate. Accordingly, defendant No.1 deposited the interest/dividend in respect of those debentures with the Enforcement Directorate. Basavraj G. Patil

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As regards the balance 16,000 debentures, defendant Nos.2 to 5, by their letter dated 9th June 1991 claimed that they had lost their certificates in respect of the debentures during transit and requested for withholding of any transfer. Defendant No.1, then by its letter dated 16th August 1991 informed defendant Nos.2 to 5 that it had received transfer forms purported to be signed by them in favour of the plaintiff and that unless restraint orders were obtained, defendant No.1 would have to return the debentures to the plaintiff. Thereafter, on 23rd December 1991 defendant No.1 returned the debentures to the plaintiff without registering the transfer since the signatures of those transferors i.e. defendant Nos.2 to 5 differed from the specimen signature on the record of defendant No.1 and also for the reason that the necessary RBI permission for transfer of debentures from defendant Nos.2 to 5 was not annexed to the transfer deed. The present suit filed by the plaintiff is limited to the 16,000 debentures in the name of defendant Nos.2 to 5.

The company petition No.120 of 1999 filed by the plaintiff came to be disposed off by the order dated 10/11th March 1999 in which it was held that in respect of the debentures held by defendant Nos.2 to 5, no relief of registration could be granted in favour of the plaintiff. In view of the claim made by defendant Nos.2 to 5 that the certificates of their debentures were lost in transit, the court held that the plaintiff for that purpose will have to be relegated to a suit for the purpose of getting a declaration that they are the owners of the debentures and further consequential reliefs. In the meantime, defendant No.1 was directed to deposit the redemption amount in the court along with unpaid interest, if any. Accordingly, defendant Basavraj G. Patil

4379.09-nms No.1 deposited the amount after which the present suit came to be filed against defendant No.1, defendant Nos.2 to 5 as the holders of the debentures, defendant Nos.6 and 7 as the brokers and the Enforcement Directorate.

At the instance of defendant Nos.2 to 5 a preliminary issue was framed in the suit on the question of limitation. By the reasoned order dated 10th September 2001, the court answered the preliminary issue in the affirmative and dismissed the suit against defendant Nos.2 to 5 as being barred by the law of limitation. In view of dismissal of suit, the court permitted defendant Nos.2 to 5 to withdraw the amount deposited by defendant No.1 towards redemption of suit debentures together with interest. The plaintiff challenged the order by preferring appeal No.964 of 2001 before the Division Bench. This appeal has since been dismissed. Defendant Nos.2 to 5 have thereafter withdrawn the entire amount of redemption of the debentures and the interest deposited by defendant No.1.

In view of the above subsequent events, defendant No.1 has taken out the present notice of motion for dismissal of the suit against it on the ground that it has become infructuous. In the alternative, defendant No.1 seeks permission to file written statement after condonation of delay in filing of the same. Defendant No.1 contends that the suit against it has become infructuous on two counts. Firstly, that the suit having been dismissed against defendant Nos.2 to 5, can no longer be maintained against it and secondly that on deposit of the redemption amount in respect of the suit debentures in the court, there is nothing further to Basavraj G. Patil

4379.09-nms be done by it in respect of the debentures. The notice of motion has been served upon the plaintiff who after seeking couple of adjournments has not appeared.

Mr. Sampat, the learned counsel for defendant No.1 submits that the written statement in the suit was not filed by defendant No.1 in view of the subsequent events happening in succession. Defendant No.1 had in fact sought further time from the Prtohonotary and Senior Master for filing written statement since the appeal filed by the plaintiff against the order of dismissal of suit against defendant Nos.2 to 5 was pending. The learned Prothonotary and Senior Master however was not pleased to grant any further time and transferred the suit to the list of undefended matters. Therefore according to him the delay in filing the written statement by defendant No.1 was purely unintentional and consequent to the abovementioned circumstances.

Mr. Sampat submits that the subsequent events narrated above are nothing but different court proceedings, the orders passed therein and compliance thereof by the parties. These subsequent events have rendered the suit infructuous against defendant No.1. Relying upon a decision of the apex court in Shipping Corporation of India Ltd. Vs. Machado Brothers and Ors. AIR 2004 SC 2093, Mr. Sampat submits that the subsequent events can be brought to the notice of the court qua application under section 151 on the basis of which the court can dismiss the suit after making necessary enquiry into the facts and circumstances alleged. In the proceedings before the apex court, on a similar application filed, the trial court had dismissed the suit on the ground that it had become infructuous and Basavraj G. Patil

4379.09-nms the High Court had upheld the order of dismissal of the suit. While considering the question of maintainability of such an application, the apex court referred to its another decision in M/s.Ramchand and Sons Sugar Mills Pvt. Ltd. Barabanki (UP) Vs. Kanhayalal Bhargava and Ors AIR 1966 SC 1899 wherein the scope of section 151 C.P.C. was discussed and held as follows.

20. From the above, it is clear that if there is no specific provision which prohibits the grant of relief sought in an application filed under section 151 of the Code, the Courts have all the necessary powers under section 151, CPC to make a suitable order to prevent the abuse of the process of Court. Therefore, the Court exercising the power under section 151, CPC first has to consider whether exercise of such power is expressly prohibited by any other provisions of the Code and if there is no such prohibition then the Court will consider whether such power should be exercised or not on the basis of facts mentioned in the application.

It then examined the further question whether the court can take cognizance of subsequent events to decide whether a pending suit should be disposed off or kept alive and if so, can a defendant make an application under section 151 CPC for dismissing the pending suit on the ground that it had lost its cause of action. For deciding the second question also the apex court referred to its earlier decision in Pasupuleti Venkateswarlu Vs. The Motor & General Traders 1975 SC 1409 to hold as follows: “25. Thus it is clear that by the subsequent event if the original proceeding has become infructuous, ex debito justitiae, it will be the duty of the court to take such action as is necessary in the interest of justice which includes disposing of infructuous litigation. For the said purpose it will be open to the parties concerned to make an application under section 151 of CPC to Basavraj G. Patil

4379.09-nms bring to the notice of the court the facts and circumstances which have made the pending litigation infructuous. Of course, when such an application is made, the court will enquire into the alleged facts and circumstances to find out whether the pending litigation has in fact become infructuous or not.”

Applying the above principles to the facts of the present case, there can be no doubt that the suit has to be dismissed against defendant No.1. Undisputedly, defendant Nos.2 to 5 were the owners of the suit debentures which the plaintiff was seeking to transfer to itself based on the transfer deeds purported to have been executed by defendant Nos.2 to 5. It has been the contention of defendant Nos.2 to 5 that the certificate in respect of the suit debentures had been lost in transit and that they had not executed any transfer deed in favour of the plaintiff. The claim of the plaintiff in respect of the suit debentures in the company petition was rejected directing it to file a suit for establishing its claim. Therefore, it was imperative for the plaintiff to obtain a relief of declaration against defendant Nos.2 to 5 that it is the owner of the suit debentures on the basis of the transfer deeds received by it. Without the declaration, there could be no valid claim to the suit debentures. Defendant No.1 could have taken action of registration of the suit debentures in the name of the plaintiff only on the order of declaration of the court in favour of the plaintiff. With the dismissal of the suit against defendant Nos.2 to 5, there can be no declaration of ownership of the suit debentures in favour of the plaintiff. Consequently, the transfer of the suit debentures to the plaintiff cannot be registered by defendant No.1. Therefore, the cause of action that the plaintiff had against defendant No.1 at the time of filing of the suit, no more exists rendering the suit infructuous. Basavraj G. Patil

4379.09-nms There is also substance in the second contention of defendant No.1 that on deposit of the entire amount of redemption in respect of the suit debentures together with interest thereon in the court, there is nothing more for defendant No.1 to do in respect of the suit debentures because, in the event of securing declaration of ownership in its favour, it was possible for the plaintiff to withdraw the redemption amount. As already seen above, on dismissal of appeal of the plaintiff, defendant Nos.2 to 5 have withdrawn the redemption amount. Thus, on both the grounds alleged, the plaintiff's suit has become infructuous against defendant No.1. In the circumstances, defendant No.1 is entitled to have notice of motion allowed in terms of prayer clauses (a) and (b). The notice of motion is accordingly allowed. The parties to bear their own costs. (SMT. R. P. SONDURBALDOTA,J.) Basavraj G. Patil