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2014 DIGILAW 950 (BOM)

Jugraj K. Ranka v. Mulchand K. Ranka

2014-04-10

M.S.SANKLECHA, MOHIT S.SHAH

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Judgment : 1. By this appeal, the appellant-plaintiffs assail the order dated 11 February 2014 passed by the learned Single Judge. The impugned order dated 11th February 2014 raised a preliminary issue to be tried under Section 9-A of the Code of Civil Procedure, 1908 (herein after referred to as 'CPC'). 2. The appellants-plaintiffs have filed the present suit for a declaration that defendant No.1 holds share of 50% in defendant No.34-firm for and on behalf of the appellant-plaintiffs. The basis for the aforesaid claim made by the appellant-plaintiffs is the following:- (a) The Plaintiffs and Defendant No.1 are brothers. Defendant No.1 is the eldest amongst all brothers. In 1972, defendant No.1, the plaintiffs and their father commenced the business of construction and development of immovable properties in the city of Mumbai. Since then, the business has been carried out as a joint family business and the profits earned are pooled together in a common hotchpotch wherefrom, the joint family purchased further properties & carried out the development work; (b) The plaintiffs claim that in 1991, the plaintiffs and defendant No.1 along with one Praful J. Shah decided to acquire development rights in respect of the property situated at CS No.287, Malabar Hill, 'D' Ward, Walkeshwar Road, Mumbai 400 006 (suit property); (c) In pursuance of the above arrangement, an agreement was executed in the form of a letter dated 12 January 1991 by which defendant No.1 along with the said Praful J. Shah acquired development rights in respect of the suit property. This acquisition in a joint venture was with defendant Nos.2 to defendant Nos.33. In terms of the above agreement, Praful J. Shah was entitled to 5% shares, defendant No.1 (on his and plaintiffs behalf) was entitled to 35% share and defendant Nos.2 to 33 were entitled to remaining 60% shares in the profits and/or loss of the joint venture; (d) In view of the fiduciary relationship between the defendant No.1 (the eldest brother) and the plaintiffs, the defendant No.1 was their trustee in respect of 35% share in the joint venture business; and (e) Thereafter, the suit property owned by the joint venture was conveyed to defendant No.34-firm in which the defendant No.1 had 50% share. This 50% share in defendant No.34-firm according to plaintiffs is being held by defendant No.1 (the eldest brother) as a trustee for all the brothers i.e. on his and on the plaintiffs behalf. 3. In the aforesaid suit, the appellant-plaintiffs have taken out the Notice of Motion, seeking an appointment of Court Receiver and a temporary injunction restraining the defendants from developing the suit property. In reply, defendants resisted the Notice of Motion pointing out that there is no fiduciary relationship between plaintiffs and defendant No.1. Further, in any event, the present suit is not maintainable under the provisions of the Benami Transactions (Prohibition) Act, 1988 (herein after referred to as 'Benami Act'). 4. Consequently on account of objection taken by respondents-defendants to the jurisdiction of this Court to entertain the suit, the learned Single Judge raised a preliminary issue as under:- “Whether the Defendants prove that the suit is barred under the provisions of Benami Transactions (Prohibition) Act, 1988?” 5. Mr. Aspi Chinoy, learned Senior Counsel appearing for the appellants-plaintiffs being aggrieved by the impugned order in support of the appeal submitted:- (a) The issue raised as a preliminary issue under Section 9A of the CPC by the learned Single Judge is not an issue of jurisdiction but substantially the whole of the dispute on merits. Therefore, in such a case, no preliminary issue could have been framed and in fact, the entire suit could be disposed of after framing the other issues which are merely consequential in nature; (b) The plaint filed by the plaintiffs is on the basis of Section 88 of the Trust Act. Defendant No.1 being the eldest amongst all brothers, was holding 50% shares in Defendant No.34-firm for and on behalf of the Plaintiffs as their trustee. This is so as funds for the purchase of interest in the firm consequently the suit property came from the common hotchpotch of the family, resulting in a trust. The said trust under Section 88 of the Trust Act does not fall under the category of Benami Transactions under the Benami Act. It is submitted that the relationship held to be fiduciary under Section 88 of the Trust Act a the relationship where one person is bound to protect the interest of the other while the first person makes a pecuniary gain for himself then the same would be held in trust for the other person. It is submitted that the relationship held to be fiduciary under Section 88 of the Trust Act a the relationship where one person is bound to protect the interest of the other while the first person makes a pecuniary gain for himself then the same would be held in trust for the other person. (c) It is submitted that in terms of Section 9A of the CPC, a preliminary issue can be raised only in respect of issue of jurisdiction relating to pecuniary or territorial or subject matter of the dispute. In this case, the preliminary issue raised is not an issue relating to pecuniary, territorial or subject matter of the dispute. By virtue of framing the aforesaid preliminary issue, the hearing of the Notice of Motion is delayed to the prejudice of the plaintiffs, who have so far not been granted any effective ad-interim relief. On the basis of the above, it was submitted that the learned Single Judge ought not to have framed a preliminary issue but listed the suit itself for final hearing. 6. As against the above, Mr. Bharat Zaveri, learned Counsel appearing for defendant Nos.1, 35, 36, 38, 42 and43 and Mr. Sanjay Jain, learned Counsel appearing for defendant No.34-firm in support of the impugned order dated 11 February 2014, submitted as under:- (a) The appeal filed from the impugned order dated 11 February 2014 is not maintainable under clause 15 of the Letters Patent, the impugned order is not a judgment but merely an interlocutory order which does not decide the rights of the parties; (b) In terms of Section 9A of the CPC, the question of jurisdiction of the Court, if raised in an application for interim relief, then that issue should be first determined by the Court before granting any interim relief. Thus, no fault can be found with the impugned order as the Court is obliged to frame a preliminary issue to prevent the consequence of granting interim relief when the Court would have no jurisdiction to entertain the suit; and (c) In this case, the issue whether or not, the suit is maintainable would arise on the plain reading of Section 4(1) of the Benami Act, giving rise to issue of jurisdiction. In the circumstances, it is obligatory on the part of the learned Single Judge to frame a preliminary issue and have the same decided first before granting any interim relief or entertaining the suit on merit. 7. Before considering the rival submissions, it is necessary to refer to the provisions of Section 9A of the CPC inserted by Maharashtra Act No.65 of 1977. Section 9-A of the CPC as inserted reads as under: “9-A, where at the hearing of application relating to interim relief in a suit, objection to jurisdiction is taken, such issue to be decided by the Court as a preliminary issue – (1) Notwithstanding anything contained in this Code or any other law for the time being in force, if, at the hearing of any application for granting or setting aside an order granting any interim relief, whether by way of stay, injunction, appointment of a receiver or otherwise, made in any suit, an objection to the jurisdiction of the Court to entertain such a suit is taken by any of the parties to the suit, the Court shall proceed to determine at the hearing of such application the issue as to the jurisdiction as a preliminary issue before granting or setting aside the order granting the interim relief. Any such application shall be heard and disposed of by the Court as expeditiously as possible and shall not in any case be adjourned to the hearing of the suit. (2) Notwithstanding anything contained in sub-section (1), at the hearing of any such application, the Court may grant such interim relief as it may consider necessary, pending determination by it of the preliminary issue as to the jurisdiction.” 8. In the present case, plaintiffs in their plaint have come with a specific case that defendant No.1, who is their elder brother, is holding 50% share in defendant No.34-partnership firm in fiduciary capacity for all the brothers including three plaintiffs and defendant No.1 himself, because the funds have come from the common hotchpotch of the joint family resulting in a trust. Besides, it is the case of the plaintiffs that the issue framed as a preliminary issue would substantially decide the suit. Therefore, it is prayed that all issues be tried together. 9. Defendant No.1 denies the above case of the plaintiffs. The relevant provisions of the Benami Act reads as under:- “4. Besides, it is the case of the plaintiffs that the issue framed as a preliminary issue would substantially decide the suit. Therefore, it is prayed that all issues be tried together. 9. Defendant No.1 denies the above case of the plaintiffs. The relevant provisions of the Benami Act reads as under:- “4. Prohibition of the right to recover property held benami (1) No suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property. (2) (No defence based on any such right shall be allowed in any suit.) … … … (3) Nothing in this section shall apply,- (a) where the person in whose name the property is held is a coparcener in a Hindu undivided family and the property is held for the benefit of the corpacerners in the family, or (b) where the person in whose name the property is held is a trustee or other person standing in a fiduciary capacity, and the property is held for the benefit of another person for whom he is a trustee or towards whom he stands in such capacity. 10. Before proceeding further with the discussion in the facts of the present case, it is necessary to refer to the rationale for insertion of Section 9A of the CPC in Maharashtra. In R.M.D. Chamarbangwalla v/s. Union of India, AIR 1957 SC 628 , the Supreme Court approved rule in Heydon's case and held that “In interpreting an enactment the Court should ascertain the intention of the Legislature not merely from a literal meaning of the words used but also from such matters as the history of the legislation, its purpose and the mischief it seeks to suppress.” In SmithklineBeecham Consumer Healthcare GMBH & Others v/s. Hindustan Lever Limited & Another 2003 Vol. 105 (2) Bom. C. R. 547, a Division Bench of this Court while interpreting Section 9-A referred to the statement of objects and reasons for ascertaining the object the legislature had in mind for inserting Section 9A in the CPC. 105 (2) Bom. C. R. 547, a Division Bench of this Court while interpreting Section 9-A referred to the statement of objects and reasons for ascertaining the object the legislature had in mind for inserting Section 9A in the CPC. The statement of objects and reasons refers to the practice followed in the Bombay City Civil Court in filing a suit against the Government without giving notice under section 80 of the CPC and in continuing such interim reliefs by permitting the plaintiff to withdraw the suit and file a fresh suit. The Legislature intended to stop this abuse of process and therefore provision of Section 9-A was introduced by Amendment Act of 1969 requiring the Court to decide the issue of jurisdiction at the time of granting or vacating the interim relief. This is clear from the following words in the statement of objects and reasons after referring to the aforesaid practice of the Bombay City Civil Court of granting ad-interim injunction without notice under section 80 of the CPC, “This practice of granting injunction without going into the question of jurisdiction even though raised, has led to grave abuse. It is, therefore, proposed to provide that if a question of jurisdiction is raised at the hearing of any application for granting or setting aside an order granting an interim relief the Court shall determine that question first.” 11. In other words, the legislature inserted section 9A in the CPC to ensure that a suit which is not maintainable for want of jurisdiction of concerned Court or barred by legislature should not be tried on merits without first deciding the question of maintainability of the suit or the statutory bar such as bar of limitation as a preliminary issue. Section 9A has been inserted in the CPC to prevent the abuse of the Court process by a plaintiff dragging a defendant to a trial of the suit on merits when there is serious doubt about the maintainability of the suit itself. Section 9A has been inserted in the CPC to prevent the abuse of the Court process by a plaintiff dragging a defendant to a trial of the suit on merits when there is serious doubt about the maintainability of the suit itself. However when the dispute on merits itself is sought to be raised as a preliminary issue, there is nothing to be achieved by directing that the main subject matter of the suit itself should be tried as a preliminary issue, more particularly when both preliminary issue and merits of the subject matter of the suit would require leading substantially the same evidence which may take 4 to 6 months. There would be duplication of efforts, time and energy. 12. It is the case of the plaintiffs that the Benami Act would not apply in this particular case for the reason that the property is held by defendant No.1 in a fiduciary capacity under Section 88 of the Trust Act. As held by the Apex Court in P. V. Sankara Kurup v/s. Leelavathy Nambiar 1994 (6) SCC 68 – a transaction which falls within the purview of Section 88 of the Trust Act, will not fall within the category of Benami Transactions in view of Section 4(3)(b) of the Benami Act. The issue raised by the defendant in this case is that the Benami Act applies but disputed by appellant-plaintiffs in view of Section 88 of the Trust Act and in view of Section 4(3) of the Benami Act. It is only on deciding the above issue could any reliefs be granted in the Notice of Motion taken out by the plaintiffs. 13. It would, thus, appear that the main controversy in the suit itself is whether the defendant No.1, the eldest brother in the family holds 50% share in the suit property as a partner of defendant No.34-partnership firm, in fiduciary capacity as contended by the plaintiffs or in his own personal capacity as contended by defendants. Hence, preliminary issue whether the suit is barred under the provisions of the Benami Act would cover the substantial controversy in the suit. The other prayers are merely consequential. 14. During the course of the hearing, we suggested to the respondents that the entire suit could be decided expeditiously by framing all issues and recording evidence. Learned counsel for the respondents did not accept the above suggestion. The other prayers are merely consequential. 14. During the course of the hearing, we suggested to the respondents that the entire suit could be decided expeditiously by framing all issues and recording evidence. Learned counsel for the respondents did not accept the above suggestion. It was submitted that even if the evidence to be led for deciding the preliminary issue may cover 90% of the evidence to be led at the trial of the suit, that would not make any difference. It is submitted that the legal position emanating from Section 9A of the CPC very clearly stipulates that the question of statutory bar should be decided as a preliminary issue. This conduct on the part of the respondents was rather unexpected. Every bona fide litigant would normally want a quick resolution to the conflict/ disputes. It does appear that the notice of motion for interim relief is pending since 2011, only on account of such stand being adopted by the respondents. 15. It is also necessary to note that at present there is no ad-interim injunction operating in favour of the plaintiffs or against the defendants and therefore, if the suit itself is tried at the earliest, such a course of action will not cause any prejudice to the defendants. The rights of the parties are subject to the result of the present proceeding. Hence, in the facts and circumstances of the case, interests of justice would be served if this appeal is disposed of with a direction that Suit No. 261 of 2011 shall be tried on all the issues at the earliest and preferably by 31 October 2014. 16. In view of the above direction, it would not be necessary to give any finding on the preliminary objection about maintainability of the appeal. This is particularly for the reason that because the preliminary issue framed decides the main issue itself, we direct that all other issues along with the preliminary issue be decided at one go. This would avoid duplication of efforts, time and energy. In view of our finding that the issue sought to be raised as a preliminary issue, substantially covers the subject matter of the suit itself, we have given the above direction. It is made clear that we have not examined the case law cited and have passed this order only in view of the peculiar facts of this case. 17. In view of our finding that the issue sought to be raised as a preliminary issue, substantially covers the subject matter of the suit itself, we have given the above direction. It is made clear that we have not examined the case law cited and have passed this order only in view of the peculiar facts of this case. 17. In the result, the appeal is disposed of with a direction that Suit No.261 of 2011 itself shall be tried in respect of all issues. The learned Trial Judge is requested to fix after hearing parties the calendar for completing the pleadings, framing issues and completing all stages of the trial within three weeks from today. The learned Trial Judge shall so fix the calender that the suit should be decided at the earliest, preferably by 31 October 2014. 18. In view of the above, the Notice of Motion taken out by the plaintiffs before the learned Single Judge become infructuous and the suit itself would be decided by 31 October 2014.