M/S. Hanu Motel Pvt. Ltd. & Anr vs U.P. Financial Corpn. Ltd. & Anr

2

2. Both these appeals have been

instituted by the appellants who are aggrieved

and dissatisfied with the order passed by the

High Court of Uttranchal at Nainital dated May

06, 2003 in Appeal against Order No. 120 of

2002 and an order dated May 28, 2003 in Civil

Review Application No. 2796 of 2003 in Appeal

against Order NO. 120 of 2002.

3. Facts in brief of the case are that

appellant No. 1 M/s Hanu Motel Pvt. Ltd. is a

company registered under the Companies Act,

1956 (`Company' for short) and is engaged in

the business of hotel and hospitality and

having its Head Office at Lucknow. Appellant

No. 2 Avdesh Kumar is a Director of the

appellant No. 1-Company. Respondent No. 1,

Uttar Pradesh Financial Corporation

(`Corporation' for short) is a Corporation

constituted under the State Financial

Corporations Act, 1956. Respondent No. 2, Ram

Raj Singh has been joined as contesting

respondent who was the Director of appellant 3

No.1-Company, but who had resigned from the

said position subsequently.

4. From the record it appears that there

was an agreement between appellant No.1-

Company and respondent No. 1-Corporation dated

May 10, 1991 whereunder loan was given by the

Corporation to the Company for the purpose of

its business. It was the case of the

Corporation that though substantial amount was

paid by the Corporation, the Company did not

abide by the terms and conditions and the

Corporation was constrained to cancel agreement

on October 31, 1991. The Corporation also

issued demand notice on August 29, 2000. Under

the said notice, a demand was made by the

Corporation from the appellant No. 1-Company to

pay an amount of Rs.185.20 lakhs. The appellant

No.1-Company, therefore, filed a suit being

Civil Suit No. 111 of 2001 in the Court of

Civil Judge (Senior Division), Haridwar on

April 28, 2001. It was a suit for declaration

that the recovery sought by the Corporation was 4

barred by time since cause of action had arisen

in 1991 and proceedings were not initiated for

a long time. It was also the case of the

Company that cancellation of loan agreement by

the Corporation was ex parte, unilateral and

hence illegal.

5. It may be stated that the suit was

filed by two plaintiffs. Plaintiff No. 1 was

the Company (appellant No. 1 herein) and

plaintiff No. 2 was Ram Raj Singh (respondent

No. 2 herein) who is a practising Advocate. It

was stated in the plaint that plaintiff No. 1

was a Company and plaintiff No. 2 was a

Director who was authorized to file a suit on

behalf of the Company-plaintiff No.1. On

January 19, 2002 an application was filed by

the plaintiffs under Order XXXIX, Rules 1 and 2

of the Code of Civil Procedure, 1908

(hereinafter referred to as `the Code') for

interim injunction restraining the Corporation

from selling hotel or property of plaintiff No.

1-Company. On February 20, 2002, application 5

was allowed and the defendants were restrained

from selling the land and building of the

plaintiffs.

6. Being aggrieved by the order of

injunction passed by the trial Court, the

Corporation preferred an appeal being Appeal

against Order No. 120 of 2002 under Order XLIII

Rule 1 of the Code on May 31, 2002. On June

01, 2002, the High Court after hearing the

parties directed the Company to deposit an

amount of Rs. Fifty lakhs in the Court within

45 days. The matter was ordered to be listed

on July 26, 2002. The company filed

Miscellaneous Application No. 4347 of 2002 on

July 10, 2002 contending that the appeal filed

by the Corporation was barred by limitation.

The High Court directed the Corporation to file

reply.

7. On August 02, 2002, according to the

appellants, Board of Directors of Company

passed a resolution to remove respondent No. 2

- Ram Raj Singh as Director of the Company. By 6

the same resolution, it authorized appellant

No. 2 Avdesh Kumar to prosecute the suit and

other proceedings.

8. Immediately thereafter on August 05,

2002, respondent No. 2 Ram Raj Singh instituted

Miscellaneous Application No. 4839 of 2002 in

Appeal against Order No. 120 of 2002 in the

High Court of Uttranchal to delete his name

from the array of parties in the appeal

alleging therein that he was not aware of any

suit being filed through him and he had not

signed the plaint. It was alleged by him that

fraud was committed by showing him as plaintiff

No. 2 and filing suit for and on behalf of the

Company. It was a case of impersonation. He,

therefore, prayed for deletion of his name and

to take appropriate proceedings for

unpardonable fraud committed by the persons

responsible.

9. On August 09, 2002, an impleadment

application was made by appellant No. 2 Avdesh

Kumar to be joined as plaintiff in the suit. 7

Likewise, on December 11, 2002, he made a

similar application for impleadment in Appeal

against Order No. 120 of 2002 being Director of

the Company as also guarantor for payment of

loan. The application was allowed on December

14, 2002 by the High Court and he was ordered

to be impleaded.

10. The High Court then heard the Appeal

against Order and by the impugned order dated

May 06, 2003 disposed of the appeal after

hearing the learned counsel for the Corporation

and the learned counsel for Ram Raj Singh. It

observed that according to Ram Raj Singh, he

had not signed the plaint and yet he was shown

as plaintiff No.2. Thus, the suit was filed by

resorting to impersonation. The Court,

therefore, held that since Ram Raj Singh did

not sign the plaint, he could not be said to be

plaintiff No. 2. As such the plaint could not

be said to be signed by an Authorized Officer

and suit by plaintiff No. 1-Company also did

not survive and was liable to be dismissed. The 8

High Court held that the appeal was liable to

be dismissed. Even the suit had become

infructuous. According to the High Court, no

such suit could have been instituted.

11. The High Court also observed that

fraud had been played to abuse the process of

law. Central Bureau of Investigation (CBI) was,

therefore, ordered to register a case against

the Company and its Directors and to

investigate the matter as to who had played

fraud and to prosecute the persons as found

guilty in investigation.

12. It was the case of the Company that no

hearing was afforded either to the Company or

to Avdesh Kumar who was already impleaded in

the appeal. The order of the High Court was in

violation of principles of natural justice and

fair play. Review application was, therefore,

filed by the appellants herein. The High Court,

however, dismissed the Review Application by

the second impugned order dated May 28, 2003

inter alia observing that when the Court held 9

that no suit could have been instituted by the

Company-plaintiff No. 1 in view of the case of

the plaintiff No. 2 Ram Raj Singh that he had

not signed the plaint and was never plaintiff

No. 2. There was thus no suit in the eye of law

and the appeal also did not survive. According

to the Court, therefore, no order of

impleadment of Avdesh Kumar could have been

passed on December 14, 2002. Hence, that order

was also set aside by the High Court dismissing

review petition.

13. Both the above orders of the High

Court of Uttaranchal have been challenged by

the appellant in the present appeals.

14. Notice was issued pursuant to which

the parties appeared. Affidavits and further

affidavits were also filed.

15. We have heard the learned counsel for

the parties.

16. The learned counsel for the appellants

strenuously contended that the orders passed by

the High Court are totally illegal, unlawful 1

and violative of basic principles of natural

justice. It was submitted that order dated May

06, 2003 was passed without hearing the

affected parties, i.e. appellant No. 1-Company

and appellant No. 2 Avdesh Kumar whose

impleadment application was allowed as early as

in December, 2002. Though the impugned order

was passed after about five months of

impleadment of appellant No.2, no hearing was

afforded to any of the appellants. It was also

submitted that the High Court was wholly wrong

in recalling the order of impleadment of Avdesh

Kumar passed in December, 2002. It was

submitted that when the Appeal against Order

was heard and decided on May 06, 2003, Avdesh

Kumar was very much a party-respondent and yet

the High Court did not think it fit to give an

opportunity of hearing to him and decided the

appeal which had caused serious prejudice to

the appellants. It was strenuously urged that

certain observations were made by the High

Court only on the basis of ipse dixit 1

allegations of Ram Raj Singh that fraud was

committed against him and he had not signed the

plaint. The counsel submitted that CBI has

investigated the matter and has submitted the

report wherein it was expressly observed that

Ram Raj Singh had signed the plaint and had

filed a suit. It was, therefore, submitted

that the orders passed by the High Court

deserve to be set aside by remitting the matter

for fresh disposal in accordance with law.

17. The learned counsel for respondent No.

2 Ram Raj Singh stated that the High Court had

passed the order and there is no infirmity

therein.

18. The learned counsel for the

Corporation submitted that substantial amount

is due and payable by the Company and in the

fight between two groups, the Corporation is

deprived of its legitimate dues.

19. Having heard the learned counsel for

the parties, in our opinion, the orders passed

by the High Court cannot be sustained. It is 1

clear that the suit was filed by two plaintiffs

as early as in April, 2001. Plaintiff No. 1

was the Company and plaintiff No. 2 - Ram Raj

Singh was shown to be a Director. An

application under Order XXXIX of the Code was

filed wherein interim relief was granted.

Appeal against Order was filed by the

Corporation and only in August, 2002, a

Miscellaneous Application was filed by Ram Raj

Singh to delete his name alleging that he had

not singed the plaint and he was fraudulently

described and shown as plaintiff No. 2 in the

suit. It is unfortunate that the High Court

decided the matter without hearing the present

appellants, i.e. appellant No. 1-Company and

appellant No. 2-Avdesh Kumar whose impleadment

application was allowed on December 14, 2002 by

the High Court and the High Court was,

therefore, aware that he was very much on

record. The learned counsel for the appellants

is also right in contending that the High Court

virtually decided the matter on the basis of 1

one sided version of Ram Raj Singh who had

alleged that fraud was committed against him.

This is clear from what is stated by the High

Court.

20. The High Court while disposing of the

appeal inter alia observed;

"The plaintiff No.2 in the suit is practicing advocate of the Lucknow Courts and is present in the Court. He made statement at Bar that he did not file any suit. The suit was filed by resorting to impersonation. He did not make signatures on the plaint and the affidavit. The plaintiff No.1 has not been arrayed through any of its Directors. The plaintiff No.2 has also not been mentioned in the array of parties to be the Director of the Company. In view of the statement made by Sri Ram Raj that he ha snot filed the suit in question and he is not prosecuting the suit, the suit is liable to be dismissed on behalf of plaintiff No.2 and the suit also cannot proceed on behalf of plaintiff No.1, as the Company ha snot been arrayed as party through any Director. Therefore, the suit is liable to be dismissed. Consequently the impugned order has merged in the order of dismissal of suit, which has rendered the appeal as infructuous. The appeal is dismissed accordingly as having become infructuous".

1 21. Granting liberty to Ram Raj Singh to

take legal recourse against those persons who

had played fraud upon him, the Court proceeded

to state;

"However, Shri Ram Raj, advocate is at liberty to take legal recourse against those persons who have played fraud upon him. Sri Ram Raj, advocate and learned counsel for the appellant have submitted that a fraud has been played to abuse the process of law, therefore, this Court may order the CBI to register a case against company and its Directors and investigate as to who has played fraud. Having regard to the seriousness of the fraud played, we direct the S.P., CBI to investigate the matter personally and prosecute the person who is found guilty in investigation. Record of the Civil Suit No.111 of 2001 shall be kept in sealed cover and shall be handed over during the course of investigation to S.P., CBI".

22. The counsel submitted that had an

opportunity been afforded to the appellants,

they could have shown that it was not correct

that Ram Raj Singh had not signed the plaint or

fraud had been committed by the Company or any

officer of the Company. According to the

learned counsel, on the contrary, CBI made the 1

inquiry and submitted the report wherein it was

specifically observed that Ram Raj Singh was

not right when he asserted that he had not

singed the plaint and that fraud was committed.

According to CBI, it was Ram Raj Singh who had

filed the suit, was shown as plaintiff No. 2

and it was his signature in the proceedings.

23. In our opinion, the learned counsel

for the appellants is also right in contending

that when present appellant No. 2 Avdesh Kumar

was impleaded in December, 2002 as party and

was very much on record in Appeal against

Order, opportunity ought to have been afforded

to him as to whether the Appeal from Order had

become infructuous and whether the suit would

not survive. To us, it appears that the High

Court followed an easy path unknown to law when

it rejected Review Petition on May 28, 2003 by

recalling the order passed on December 11, 2002

virtually rectifying the order passed on May 6,

2003. In our considered opinion, the High Court

ought to have extended an opportunity of 1

hearing before passing order dated May 6, 2003

as also dated May 28, 2003 to appellant No.1-

Company as well as to appellant No.2-Avdesh

Kumar.

24. As to the report of CBI and prima

facie case found against Ram Raj Singh in the

investigation undertaken, it would not be

appropriate to state anything one way or the

other. Since we are of the view that both the

orders passed by the High Court are liable to

be set aside only on the ground of non-

observance of natural justice, the matter

should be remanded to the High Court for fresh

disposal in accordance with law. Observations

made by this Court may adversely affect one or

the other party and it is not appropriate to

express any such opinion. We are, however,

convinced that both the orders dated May 06,

2003 and May 28, 2003 passed by the High Court

are liable to be set aside.

25. In the result, both the appeals are

allowed. Orders dated May 06, 2003 and May 28, 1

2003 are hereby set aside. The matters are

remanded to the High Court for fresh decision

in accordance with law after giving opportunity

of hearing to all the parties.

26. Before parting with the matter, we may

clarify that we may not be understood to have

expressed any opinion on the merits of the

matter, one way or the other. As and when the

matter will be placed before the High Court, it

will be decided on its own merits without being

influenced by any observations made by it in

the impugned orders or by us in this judgment.

27. Ordered accordingly. On the facts and

in the circumstances of the case, there shall

be no order as to costs.

CIVIL APPEAL NO. 6282 OF 2008 @ SPECIAL LEAVE PETITION (CIVIL) NO.5593 OF 2007

28. Leave granted.

29. The present appeal is an offshoot of

appeals arising out of Special Leave Petition

(Civil) Nos. 10554-55 of 2002 titled M/s Hanu 1

Motels Pvt. Ltd. v. U.P. Financial Corporation

Ltd. & Anr.

30. So far as the facts of the case are

concerned, we have stated them in detail in the

above appeals and it is not necessary to

reiterate them here. It may, however, be stated

that in the light of the directions issued by

the High Court in the order dated May 06, 2003

in Appeal against Order No. 120 of 2002 that

the Central Bureau of Investigation (CBI)

should take appropriate steps against the

persons who had played serious fraud by

investigating the matter and by prosecuting the

persons found guilty in investigation that CBI

made the inquiry and submitted the report.

31. In the report, CBI collected

documentary and oral evidence which established

that Ram Raj Singh had filed Declaratory Suit

No. 111 of 2001 in the Court of Civil Judge

(Senior Division), Haridwar. He signed the

plaint, vakalatnama and affidavit in the suit.

Oral and documentary evidence collected by CBI 1

also revealed and the investigation established

that Ram Raj Singh was a Director of M/s Hanu

Motels Pvt. Ltd.

32. In the light of the findings of CBI,

the Registrar General of the High Court filed a

Complaint No. 297 of 2005 against Ram Raj Singh

that he intentionally and deliberately made a

false statement before the High Court to the

effect that he did not file any suit in the

Court of Civil Judge (Senior Division),

Haridwar, he did not put signatures on plaint

and affidavit and was not prosecuting a suit

nor he had been a Director of M/s Hanu Motel

Pvt. Ltd. and the suit was filed by resorting

to impersonation. According to Registrar

General by doing so, Ram Raj Singh had

committed an offence punishable under Section

193, Indian Penal Code, 1860. He, therefore,

prayed that accused Ram Raj Singh be summoned

and tried in accordance with law.

33. Accused Ram Raj Singh in view of the

complaint filed by Registrar General of the 2

High Court made an Application for Direction

No. 11659 of 2006 in Appeal against Order No.

120 of 2002 praying therein that no cognizance

should be taken of the investigation by

Inspector, CBI and for quashing of proceedings.

34. The High Court by the impugned order

dated December 22, 2006 quashed the proceedings

inter alia observing that proceedings initiated

by the Registrar General were without

jurisdiction and not maintainable. They were,

therefore, liable to be quashed. Accordingly,

the proceedings were quashed by the High Court

by granting liberty to pass fresh order in

accordance with law.

35. Since we have allowed the appeals

filed by the appellants in the connected

matters and set aside the order passed by the

High Court by remitting the matter to the High

Court for fresh disposal in accordance with law

after affording opportunity of hearing to all

the parties, in our opinion, this order also is

liable to be set aside. Since the High Court 2

will consider the entire material on record

including report of CBI, it is obvious that the

High Court will pass appropriate order in the

light of materials placed before the Court.

36. For the foregoing reasons, the appeal

deserves to be allowed and is accordingly

allowed. The order dated December 22, 2006

passed by the High Court in Application for

Direction No. 11659 of 2006 in Appeal against

Order No. 120 of 2002 is set aside and the

matter is remitted to the High Court for fresh

decision in accordance with law after affording

opportunity of hearing to all the parties.

37. Ordered accordingly. On the facts and

in the circumstances of the case, there shall

be no order as to costs.

............................................................J. (C.K. THAKKER)

......................................................J. (D.K. JAIN) NEW DELHI, 2

October 24, 2008.