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2012 (7) TMI 1088 - HC - Indian LawsPeriod of limitation for initiation of suit. - Administrator had granted right to construct/develop the suit land - Sale to nominee or 3rd party - Breach of fiduciary duty - validity of sale made. HELD THAT - We have adverted to some of these events because they would suggest prima facie, though in fairly unmistakable terms, that parties were in dispute over the transactions which Ferani entered into right. The record before the Court would, prima facie, indicate that from time to time the administrator raised objections to those transactions and was confronted with the defence by Ferani that the transactions accorded with the prevailing market price and were genuine transactions. In this background, the fact that the administrator chose to file the suit only in May 2008 assumes significance. Equities have intervened in the meantime. It has been stated before the Court on behalf of Ferani that in the interregnum steps have been taken for the removal of encroachment and for carrying out the work of development. Third party rights have intervened. Even after the suit was instituted on 13 May 2008, an application for ad interim relief was moved before the Learned Single Judge only on 3 March 2010. The only explanation which the administrator had for the delay in moving an application for ad interim relief is that the Sub Registrar and the Municipal Corporation had been moved not to register documents or, as the case may be, to grant building permission and it was only in October / December 2009 that the Municipal Corporation informed him that absent any injunction, it would proceed with permissions. Admittedly, in the meantime, the work under the project was continuing. These are circumstances which must weigh with the Court in declining to grant a stay on construction at the ad interim stage. The order which the Learned Single Judge passed precludes the sale of any unit whatsoever without the consent of the parties. Parties are in dispute and an order of the Court restricting the sale of constructed premises only with the consent of the parties would virtually bring the entirety of the project to a stand still. The entitlement of the administrator under the agreement dated 2 January 1995 is to the receipt of a share in the gross total consideration equivalent to 12%. The grant of injunctive relief restraining Ferani from selling its units would therefore neither be in accordance with the equities of the situation nor the mutual rights and obligations of the parties. Accordingly, the Appeals shall stand disposed of in terms of the directions. A Commissioner is appointed for recording evidence. Matter restored back before Single Member Bench with directions and questions framed to be decided.
Issues Involved:
1. Maintainability of the suit based on the claim being barred by limitation. 2. Interpretation and application of Section 9A of the Code of Civil Procedure, 1908. 3. Allegations of fraud and breach of fiduciary duty by the Defendants. 4. Delay in seeking ad interim relief and its impact on the case. 5. Determination of interim relief pending the resolution of the preliminary issue. Detailed Analysis: 1. Maintainability of the Suit Based on Limitation: The primary issue raised by the First Defendant was that the suit was barred by limitation. The Learned Single Judge directed that a preliminary issue under Section 9A of the Code of Civil Procedure, 1908, be framed to determine this. The objection was based on the fact that several transactions between the parties, which are sought to be rescinded, took place within three years of the suit's institution, and thus, some claims might be within limitation. The court held that the plea of limitation is a plea concerning the jurisdiction of the Court and must be determined as a preliminary issue. 2. Interpretation and Application of Section 9A of the Code of Civil Procedure, 1908: Section 9A mandates that when an objection to the jurisdiction of the Court is raised at the hearing of an application for interim relief, the Court must determine this issue first as a preliminary issue before granting or setting aside the interim relief. The Court emphasized that Section 9A is mandatory and requires the Court to determine the issue of jurisdiction expeditiously. The Court also noted that the issue of limitation falls within the ambit of an objection to jurisdiction under Section 9A. 3. Allegations of Fraud and Breach of Fiduciary Duty by the Defendants: The Plaintiff alleged that the Defendants entered into transactions with front/nominee companies to dilute the consideration payable to the Plaintiff, thus committing fraud and breaching their fiduciary duty. The allegations included transactions with related parties, manipulation of areas and consideration in negotiation letters, and concealment of actual purchase consideration in agreements. The Court noted that the interpretation of "third parties" in the agreement should be understood as genuine purchasers to ensure the Plaintiff's entitlement to 12% of the gross consideration. 4. Delay in Seeking Ad Interim Relief and Its Impact on the Case: The Court observed significant delay on the part of the Plaintiff in moving the Court for ad interim relief. The delay was considered from two perspectives: the period between the disputes arising under the agreement and the suit's institution, and the period between the suit's institution and the first application for ad interim relief. The Court found that the Plaintiff was aware of the disputed transactions since April 2000 but chose to file the suit only in May 2008 and moved for ad interim relief in March 2010. This delay weighed against granting ad interim relief. 5. Determination of Interim Relief Pending the Resolution of the Preliminary Issue: The Court held that the Learned Single Judge erred in disposing of the Motion for interim relief finally without resolving the preliminary issue of jurisdiction. The Court directed that the issue of limitation be tried as a preliminary issue, and pending this determination, Ferani Hotels Private Limited was directed to maintain accounts and continue depositing an amount equivalent to 12% of the gross sale consideration in a designated bank account. The Court emphasized the need for expeditious completion of the recording of evidence and disposal of the preliminary issue. Conclusion: The appeals were disposed of with the direction to try the issue of limitation as a preliminary issue. The Plaintiff was allowed to file an affidavit in lieu of examination-in-chief, and a Commissioner was appointed to record evidence. Ferani Hotels Private Limited was directed to maintain accounts and deposit 12% of the gross sale consideration in a designated bank account pending the resolution of the preliminary issue. The Court clarified that the observations made were confined to the present stage and would not affect the final disposal of the Notice of Motion or the suit.
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