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2014 DIGILAW 1699 (BOM)

Haldyn Glass Limited v. Saumyalata Shyama Shetty

2014-08-01

S.C.GUPTE

body2014
JUDGMENT P.C. The present suit is filed by the Plaintiff for a declaration that the Plaintiff owns the suit flat and for a decree of possession and permanent injunction restraining Defendant No.1 from transferring, selling, alienating, encumbering and / or creating third party rights in respect of the same. Defendant No.1 is an ex-employee of the Plaintiff and presently an accused in a case registered by the Economic Offences Wing, Crime Branch, Mumbai (EOW) for cheating the Plaintiff and misappropriating its funds. It is the case of the Plaintiff that the suit flat has been purchased by Defendant No.1 from out of the misappropriated funds of the Plaintiff. The present Notice of Motion is taken out for appointment of Court Receiver in respect of the suit flat. 2. The Defendants have inter alia objected to the maintainability of the suit on the ground of limitation. A preliminary issue will have to be accordingly framed under Section 9A of the Code of Civil Procedure, 1908. The following issue is framed as a preliminary issue : “ Whether the suit is barred by the law of limitation? ” 3. The Plaintiff applies for interim reliefs, as claimed in the Notice of Motion, pending determination of the preliminary issue, under Sub-section (2) of Section 9A. The following order considers that application. 4. The case of the Plaintiff may be briefly outlined as follows : (i) The Plaintiff, along with its group company, Haldyn Corporation Limited (formerly known as Haldyn Glass Limited), is engaged in the business of manufacture of glass containers and packing materials at its factory located in Gujarat; (ii) In or about February 1990, Defendant No.1 joined Haldyn Corporation Limited and was transferred to the Plaintiff company in July 2005. Defendant No.1 held several important positions in Haldyn Corporation and the Plaintiff company till termination of her employment on 23 March 2012; (iii) Having regard to the long association of Defendant No.1 with the group and the trust reposed by the Executive Chairman of the Plaintiff in Defendant No.1, the Plaintiff authorized Defendant No.1 along with two others (who are co-accused with Defendant No.1 in the criminal case filed by EOW) to operate the bank accounts of the Plaintiff inter alia for handling sales and purchases of the Plaintiff; (iv) On or about 28 February 2008, Defendant No.1, by misappropriating the funds of the Plaintiff purchased the suit property, namely, Flat No.B-1701, 17th floor, Mahindra Eminente, Veronica Building, S.V. Road, Goregaon (West) in Mumbai. Defendant No.1 inter alia made unauthorized payments aggregating to Rs.21,44,635/- directly from the bank accounts of the Plaintiff in breach of the trust and authority reposed in, and delegated to, her. Defendant No.1 also paid a sum of Rs.32,76,984/- directly from the bank accounts of the Plaintiff for carrying out interior works in the suit flat; (v) The misappropriation of funds and unauthorized acquisition of the suit flat came to light after the present Managing Director of the Plaintiff company, appointed on 1 June 2011, caused a closer look at the financial affairs of the Plaintiff. A special auditor appointed to examine the accounts of the Plaintiff discovered large sums of money paid by cheques as well as through RTGS to various fictitious and bogus entities, gross irregularities in purchases and expenses on behalf of the Plaintiff, issuance of several cheques to third parties without any authorization or correspondence from such parties with the Plaintiff and issuance of several cheques by Defendant No.1 to herself and to her relatives without any authorization from either the board or any other authority of the Plaintiff company. After detailed scrutiny, it was found that between April 2007 and November 2011, Defendant No.1 in concert with the co-accused had siphoned off and misappropriated funds of more than Rs.68 crores and amassed large number of assets worth crores of rupees out of such funds; (vi) In or about January 2012, criminal complaints were filed by the Plaintiff with Senior Inspector of Police, Sahar Police Station. The Sahar Police Station registered an FIR, being FIR No.40/2012, under Sections 408, 420 read with Section 34 of the Indian Penal Code, 1860 against Defendant No.1 and her co-accused; (vii) On 7 February 2012, the Sahar Police Station sealed and attached the suit flat. The other movable assets of Defendant No.1 were also attached by the police. The properties were attached on the footing that they were properties acquired through stolen funds and through fraud; (viii) In March 2012, the Plaintiff terminated the services of Defendant No.1 on account of the fraud committed by her; (ix) In October 2012, Defendant No.1 filed an application for return of property as well as an application for de-sealing / de-attachment of the suit flat and possession of the same before the Additional Chief Metropolitan Magistrate, 47th Court at Esplanade, Mumbai. The Plaintiff simultaneously filed an application under Section 451 of the Criminal Procedure Code for return of the property before the Additional Chief Metropolitan Magistrate. In the meantime, by an order passed by this Court in a writ petition, the investigations in the criminal case were transferred to EOW as an independent investigating agency. The EOW registered CR No.42/2012 under Sections 408, 420, 465, 467, 468, 471 read with Section 34 and Section 201 of the IPC against Defendant No.1 and her co-accused. In November 2013, EOW filed a detailed report before the Additional Chief Metropolitan Magistrate inter alia recording that there was ample evidence found by the agency to show that the funds of the Plaintiff had been utilized by the accused towards purchase of the suit flat; (x) On 30 April 2014, Additional Chief Metropolitan Magistrate, 47th Court, Esplanade, Mumbai, passed a common order on the applications of the Plaintiff and Defendant No.1 partly allowing the Plaintiff’s application for return of property as also allowing the application of Defendant No.1 for de-sealing and de-attachment of the suit flat. The order of de-sealing and de-atttachment was only on the ground that the police did not have the power to seize / seal immovable property under Section 102 of the Cr.P.C. 5. In these premises, the Plaintiff filed the present suit on 15 May 2013 inter alia for a declaration of ownership of the suit flat and a permanent injunction against Defendant No.1 for dealing with or disposing of the suit flat. In these premises, the Plaintiff filed the present suit on 15 May 2013 inter alia for a declaration of ownership of the suit flat and a permanent injunction against Defendant No.1 for dealing with or disposing of the suit flat. It is the case of the Plaintiff that the suit flat is purchased by Defendant No.1 from out of the funds misappropriated by her from the Plaintiff’s accounts. It is claimed by the Plaintiff that apart from the unauthorized payments of Rs.21.44 lakhs and Rs.32.76 lakhs aggregating to over Rs.54 lakhs directly from the bank accounts of the Plaintiff towards the purchase and renovation of the suit flat, even the balance payment has been made from the funds siphoned off by Defendant No.1 from the Plaintiff company. It is the Plaintiff’s case that the Plaintiff seriously apprehends that Defendant No.1 will deal with or alienate or create third party rights in respect of the suit flat and the same will be lost unto the Plaintiff. In these premises, the Plaintiff has applied for appointment of interim Court Receiver of the suit flat. 6. Defendant No.1 initially filed a short affidavit opposing grant of adinterim reliefs. It is claimed by Defendant No.1 in her affidavit that the suit flat and another flat purchased by the Plaintiff in the same building were booked and registered on the same day; that Defendant No.1 had given a loan to the daughter of the Chairman of the Plaintiff company as well as to a partnership firm in which the present MD of the company and his relatives were partners; that the amounts paid for booking of the suit flat for Defendant No.1 had to be adjusted against loans given by Defendant No.1, as aforesaid; that the amounts paid towards renovation were not only towards the suit flat, but also towards the other flat bought by the Plaintiff company. Defendant No.1 has since filed a written statement and an affidavit in reply to the Notice of Motion adopting the written statement. Defendant No.1 has since filed a written statement and an affidavit in reply to the Notice of Motion adopting the written statement. It is inter alia claimed by Defendant No.1 in her written statement that it had been the modus operandi of the Chairman and Managing Director of the Plaintiff that huge funds were taken out of the Plaintiff’s accounts in cash by producing fake and bogus bills and various properties and leisures were purchased out of these funds for their personal use; that various amounts were withdrawn from the Plaintiff’s account purportedly in the name of the employees of the Plaintiff and other fictitious parties which were then rooted back for the personal use of the Chairman and Managing Director of the Plaintiff; that whilst the complaint proceeds on the footing that Defendant No.1 had cheated the Plaintiff and had misappropriated the funds aggregating to Rs.18 crores, the FIR filed by the Chairman of the Plaintiff alleges only a misappropriation of Rs.6.25 crores, whereas the audit report of the auditors of the Plaintiff dated 30 May 2012 states in clear terms that the amount of misappropriation was yet to be ascertained and on the other hand, the charge sheet against Defendant No.1 talks about misappropriation of a sum of Rs.1.50 crores, indicating thereby that the Plaintiff itself was not sure of the quantum of the alleged misappropriated amount; that Defendant No.1 denied having misappropriated any funds of the Plaintiff company; that the Chairman of the Plaintiff company was aware about the booking of the two flats, namely, the suit flat and the other flat bought for the Chairman of the Plaintiff; that Defendant No.1 had given loans to the daughter of the Chairman and Managing Director of the Plaintiff and that it was understood that these loans would be adjusted against the monies paid by the Plaintiff for booking of the suit flat; that the amounts paid towards interior works were for both the suit flat and the flat bought for the Chairman of the Plaintiff company. Defendant No.1 has relied on a couple of Income-tax returns filed by Defendant No.1 in support of her case that she earned income not by way of salary from the Plaintiff company but also from other sources such as profits and gains from business and profession and income from house property. 7. Defendant No.1 has relied on a couple of Income-tax returns filed by Defendant No.1 in support of her case that she earned income not by way of salary from the Plaintiff company but also from other sources such as profits and gains from business and profession and income from house property. 7. Mr.Seervai, learned Senior Counsel appearing for the Plaintiff, submitted that the suit flat was clearly purchased from out of the funds of the Plaintiff company; that at any rate, it was clear that a sum of more than Rs.54 lakhs was paid directly from out of the Plaintiff’s account to the builders as well as interior decorators for purchase and renovation of the suit flat without any semblance of authority; that the Plaintiff had a good prima facie case that the suit flat was purchased from out of the Plaintiff’s funds and was owned by the Plaintiff; and that there was a case for appointment of Court Receiver to protect and preserve the suit flat. 8. Mr.Shah, learned Senior Counsel appearing for Defendant No.1, opposed the Notice of Motion and submitted as follows : (a) The burden of proving that the suit flat was bought out of the funds of the Plaintiff company was on the Plaintiff and this burden was not discharged prima facie by the Plaintiff. Out of the total purchase price of about Rs.1.44 crores, only a sum of over Rs.21 crores was shown to have been paid from the Plaintiff’s account. The balance amount was paid from out of the first Defendant’s own sources as well as through bank loans; (b) The chairman of the Plaintiff company, by committing acts of fraud by unauthorised withdrawals of monies from the accounts of the Plaintiff and in the process, using the account of Defendant No.1, actually siphoned off monies of the Plaintiff; (c) The suit property was purchased by Defendant No.1 with the knowledge and consent of the Plaintiff; (d) The suit was barred by the law of limitation and even otherwise, there was a gross delay and laches on the part of the Plaintiff in approaching this court, which disentitled the Plaintiff to any equitable relief. 9. Firstly, it needs to be noted that out of the initial payment for the suit flat, a sum of Rs.21,44,645/- has admittedly come directly from the bank accounts of the Plaintiff. 9. Firstly, it needs to be noted that out of the initial payment for the suit flat, a sum of Rs.21,44,645/- has admittedly come directly from the bank accounts of the Plaintiff. So also it is clear that a sum of Rs.32,76,984/- for carrying out interior works has come directly from the bank account of the Plaintiff. No doubt, it is the case of Defendant No.1 that the amount spent for renovation work from out of the Plaintiff’s accounts has been spent for renovation of both flats, namely, the suit flat and the flat purchased by the Plaintiff company for the Chairman of the Plaintiff. It is at any rate, however, admitted by Defendant No.1 that about 50% of the amount from out of the sum of Rs.32,76,984/- is spent towards the suit flat. Defendant No.1 has been unable to show any lawful authority for payment of these amounts from the account of the Plaintiff towards the purchase and renovation of the suit flat. 10. There is a detailed report filed by the EOW in the criminal case pending against Defendant No.1 and her co-accused. The report indicates various items found in the lockers of Defendant No.1 as well as various immovable properties purchased by Defendant No.1 in her own name as well as in the name of her close relatives. The report indicates that Indian currency notes of about Rs.57.50 lakhs as well as gold bars, gold and silver coins of an estimated value of Rs.61.97 lakhs were found in one bank locker. Another locker owned by Defendant No.1 in Vijaya Bank was found containing gold jewellery of an estimated value of Rs.1.69 crores. Apart from these movables, it was found by the EOW that immovable properties were purchased / sought to be purchased by Defendant No.1 in her own name as well as in the name of her close relatives; an amount of about Rs.62 lakhs paid by Defendant No.1 in this behalf was recovered from one Prasanna Developers; whereas an amount of Rs.37 lakhs was recovered from one M/s.Vijay Grihnirman Private Limited. These amounts were purportedly paid by Defendant No.1 to the concerned developers towards purchase of flats. Apart from these, expensive fleet of cars including a Mercedes Benz (C-350 model) was seized from Defendant No.1 and the co-accused. These amounts were purportedly paid by Defendant No.1 to the concerned developers towards purchase of flats. Apart from these, expensive fleet of cars including a Mercedes Benz (C-350 model) was seized from Defendant No.1 and the co-accused. The Plaintiff has given details and particulars including copies of various remittances made by Defendant No.1 unauthorizedly through the Plaintiff’s accounts as well as remittance advices issued in favour of various agencies together with bank account statements of the Plaintiff company reflecting the debits of these amounts. The documents produced by the Plaintiff before the Court disclose an elaborate scheme of fraud and embezzlement. There is a clear prima facie case of siphoning off and misappropriation of diverse amounts aggregating to crores of rupees from the Plaintiff’s accounts. There is no plausible explanation placed on record by Defendant No.1 to show the authority for all these debits and remittances. On the other hand, the accounts disclosed by Defendant No.1 before this Court present a strange pattern of income and expenses, which is prima facie hard to believe. What is more, even if one goes by the figures disclosed by Defendant No.1 in her accounts, it is clearly apparent that over the immediate two years following the purchase of the suit flat, the total disclosed income of Defendant No.1 falls far too short of the payment made by her to the vendors of the suit flat, i.e, by about Rs.1 crore. Having regard to these facts, the Plaintiff has clearly discharged its burden prima facie to show that the funds for purchase of the suit flat have come through the Plaintiff’s accounts and by way of an elaborate scheme of embezzlement and misappropriation on the part of Defendant No.1. 11. It is claimed by Defendant No.1 that a major source of funds for purchase of the suit flat has come from bank finance. It is, however, an admitted position that this bank finance has been repaid over the next couple of years and as demonstrated above, all known sources of income of Defendant No.1 put together do not justify the repayment. Besides, as demonstrated by the Plaintiff's Counsel at the hearing, even if one takes into account the bank finance and the payment sourced from the Plaintiff’s account, the amount paid towards the suit flat by Defendant No.1 cannot be accounted for even after taking all her known sources of income into account. Besides, as demonstrated by the Plaintiff's Counsel at the hearing, even if one takes into account the bank finance and the payment sourced from the Plaintiff’s account, the amount paid towards the suit flat by Defendant No.1 cannot be accounted for even after taking all her known sources of income into account. In fact, it was accepted by learned Counsel for Defendant No.1 that the suit flat was purchased by Defendant No.1 from sources other than the disclosed sources of income of Defendant No.1 to the Income-tax Department. 12. The defence of Defendant No.1 that the Chairman and Managing Director of the Plaintiff company was party to the fraud, is merely based on the statement of Defendant No.1 herself. There is no material on record to show that there was any fraudulent act on the part of the Chairman or Managing Director of the Plaintiff company. In any event, the alleged fraud of the Chairman and / or Managing Director of the Plaintiff is neither here nor there. Defendant No.1 cannot possibly justify the embezzlement or misappropriation of funds and purchase of the suit flat from out of those funds, by alleging a similar fraud on the part of the Chairman and Managing Director of the Plaintiff Company. 13. The claim of Defendant No.1 that the Plaintiff company knew of the purchase of the suit flat by Defendant No.1 from out of the funds of the Plaintiff is also based almost exclusively on the Defendant’s own testimony and there is nothing on record to show that the Plaintiff was aware of the fact of the purchase of the suit flat by Defendant No.1 or the source of funds for such purchase. 14. There is no case of any unexplained delay on the part of the Plaintiff in approaching this Court for interlocutory reliefs. The alleged elaborate scheme of fraud practiced by Defendant No.1 was disclosed after a detailed special audit was carried out at the instance of the Managing Director of the Plaintiff and immediately thereupon, the Plaintiff approached the police authorities with a criminal complaint. The alleged elaborate scheme of fraud practiced by Defendant No.1 was disclosed after a detailed special audit was carried out at the instance of the Managing Director of the Plaintiff and immediately thereupon, the Plaintiff approached the police authorities with a criminal complaint. The police and EOW have since discovered various incriminating materials based on which the suit flat was sealed by the police and after the de-sealing order was passed by the learned Magistrate on the ground that under the Cr.P.C. immovable property could not be seized by the police, the Plaintiff approached this Court for urgent reliefs in respect of the suit flat. 15. The power of the Court to appoint a court receiver is to be exercised, if the Court finds it just and convenient to appoint such Receiver. The object of appointing a court receiver is to protect, preserve and manage the suit property during the pendency of the suit. There may be a well founded apprehension that the property in the suit may be dissipated or other irreparable mischief may be done to it, unless the Court appoints a receiver. There may also be a case for holding the property in the hands of an officer appointed by the Court for the benefit of the true owner that may be found after the conclusion of the trial. In the latter case, not only is the property to be protected and preserved, but also managed inter alia by receiving income therefrom so that the property and its income would be available for the benefit of the true owner. There may also be other weighty reasons for such appointment. In sum, the appointment of a receiver is a matter which rests on the sound discretion of the Court. In the present case, prima facie the property has come in the hands of Defendant No.1 through illegal means and there is a concrete apprehension of dissipation of the property or irreparable mischief thereto, if the court receiver is not appointed. In an old Calcutta case, the Calcutta High Court explained the distinction between the case in which a temporary injunction is granted and a case in which a receiver is appointed. In an old Calcutta case, the Calcutta High Court explained the distinction between the case in which a temporary injunction is granted and a case in which a receiver is appointed. In Chandilal vs. Padmanand [(1895) ILR 22 Cal 459], the Court held that while in either case, it must be shown that the property should be preserved from waste or alienation; in the case of temporary injunction, it is sufficient if it be shown that the plaintiff in the suit has a fair question to raise as to the existence of the right alleged, whilst in the case of receiver, the plaintiff has to show good prima facie title to the property over which the receiver is sought to be appointed. In the facts of the present case, as pointed out above, the Plaintiff has clearly made out a good prima facie case to show that the property was purchased out of funds embezzled from it and had to be made over to the Plaintiff and that there was clear likelihood of the property being dissipated or encumbered and / or irreparable mischief being done to it at the hands of the wrongdoer. 16. As discussed above, here is a case for appointment of court receiver not only on the ground that the property needs to be protected, but also on the ground that it must be preserved and managed for the benefit of the true owner of the property and the property as well as its income should be held by an officer of the court for the benefit of the true owner to be found at the trial. 17. There is one more reason that the Court must grant the prayer of receiver in the present case. This is not a case of an ordinary civil dispute between rivals claiming to be entitled to an immovable property. This is a case of acquisition of a valuable immovable property by resorting to criminal acts of cheating, forgery and criminal breach of trust. Admittedly, more than Rs.37 lakhs have been withdrawn by Defendant No.1 from the accounts of the Plaintiff and paid to the vendor and various parties towards purchase and renovation of the suit flat. There is no plausible explanation of any lawful authority to do so on the part of Defendant No.1. Admittedly, more than Rs.37 lakhs have been withdrawn by Defendant No.1 from the accounts of the Plaintiff and paid to the vendor and various parties towards purchase and renovation of the suit flat. There is no plausible explanation of any lawful authority to do so on the part of Defendant No.1. Even otherwise, having regard to the elaborate scheme of siphoning off funds from the accounts of the Plaintiff, which is prima facie borne out from the record produced by the Plaintiff before this Court, there is reason to believe that the other funds for purchase of the suit flat have also come from these very criminal acts. The Delhi High Court in the case of Subroto Ghose vs. Ashok Kumar Gupta2 was concerned with the case of a similar act of grabbing of immovable property by the defendant by illegal means, and by hatching a criminal conspiracy and preparing false and fabricated documents. In that context, the Court held as follows : “(19) The next question is what should be the appropriate order to be passed in the facts and circumstances of the case. The facts noted above show that the present is not a routine case of a suit for possession filed by an owner against a licence after expiry of the licence period. It is also not a case of possession of property being sought from a person whose possession though initially authorised, has become unauthorised on the day of institution of the suit. It is a case of grabbing of a valuable immovable property through criminal acts. It is a very serious matter where the defendants 1 to 5 have prima facie included in criminal conspiracy, fraud, fabrication of documents, collusion and deceit knowingly and intentionally using false and fabricated documents to falsify public records. Such blatant acts deserve to be dealt with through strong and effective measures. The defendants cannot be permitted to continue to enjoy the fruits of their illegal acts. They do not deserve to remain in possession of the suit property even for a single day any further. It will be a travesty of justice to ask the plaintiff to wait till the final decision of the suit when a decree for possession may be ultimately passed. They do not deserve to remain in possession of the suit property even for a single day any further. It will be a travesty of justice to ask the plaintiff to wait till the final decision of the suit when a decree for possession may be ultimately passed. In the facts and circumstances of the case, I feel it eminently, just and convenient to appoint a Receiver to take possession of the suit property and to manage the same.” 18. Even in the present case, there is a clear prima facie case that the property has been acquired by Defendant No.1 through criminal conspiracy by siphoning off funds and through deceit and criminal breach of trust. Not granting the order of receiver would work to the benefit of the wrongdoer. On the other hand, the aggrieved party would be deprived of the income of the property acquired through illegal means by deceiving it. The conscience of the Court would not countenance such a course. 19. For the reasons stated above, there is a clear case made out for appointment of a Court Receiver. Accordingly, the following order is passed. (i) Pending the determination of the preliminary issue framed as above, there shall be an ad-interim order in terms of prayer clause (a); (ii) The Court Receiver shall take physical possession of the suit flat described in prayer clause (a) from Defendant No.1 and prepare a valuation report of the same; (iii) The Court Receiver shall submit a report to the Court within a period of six weeks from today. At the hearing of the report, the question of appointment of agent of the Court Receiver pending determination of the preliminary issue, will be considered; (iv) Till the Court Receiver takes possession of the suit flat described above, there shall be an interim order in terms of prayer clause (b). 20. On the application of the learned Counsel for Defendant No.1, the present order is stayed for a period of three weeks from today. Injunction in terms of prayer clause (b) granted above shall, however, continue to operate during the period of stay. Leaned Counsel for Defendant No.1 accepts that Defendant No.1 has not yet moved into the suit flat and shall not do so during the period of the stay.