2017 (11) TMI 1969 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - mortgage of property - injunction sought to restrain the defendants from dealing with or disposing of or transferring or creating any encumbrance in respect of the property pertaining to the Avani Grand project - equitable right of redemption - Order XXXIX Rule 1(b) of the Code - HELD THAT - Since the plaintiff has not been able to show in the remotest form any modicum of a claim against the second defendant, no property of the second defendant can be attached in furtherance of the plaintiff's admitted claim against the first defendant and no order of injunction may be issued against any property of the second defendant under Order XXXIX Rule 1(b) of the Code. An order of attachment, as the interlocutory court has rightly found, is a tall order and requires both an unimpeachable claim and the likelihood of such claim remaining unrealised if no order of attachment is passed. An injunction under Order XXXIX Rule 1(b) of the Code requires the plaintiff to demonstrate that he is a creditor of the person whose property is to be affected by the order of injunction. On the material carried to court, the plaintiff does not appear to be a creditor of the second defendant. It is with considerable regret and diffidence that it needs to be observed that the filter that was traditionally in place before a matter reached the court may have been considerably eroded in value and diluted in its moral content. The judiciary is not a system of a judges alone; the object of the exercise in a court is not to obtain an unworthy order or defeat a worthy cause, the pursuit is of justice - Even though justice cannot be pursued in the adversarial system by ensuring the removal of injustice, the shared responsibility to prevent unjust causes being espoused in court cannot be shrugged off at the Bar. The judiciary cannot stand, far less remain upright, if either pillar of the Bench or the Bar falters. There comes a time when a system must assert itself, if only to survive against the vicious onslaught of such unscrupulous litigants and their advisors as the present plaintiff. If dockets are not to be clogged with unworthy claims and false defences, litigants who carry vexatious causes must be appropriately dealt with in the award of costs. For the plaintiff's colossal attempt to hoodwink the court and try and obtain an undeserving order, the plaintiff-appellant in this case will pay costs assessed at ₹ 15 lakh each to the second defendant and R-Com - The second defendant and R-Com will be entitled to execute this part of the order in accordance with law. In view of the submission on behalf of the appellant that it did not seek any order of attachment in respect of Avani Aspires, the order impugned is set aside in such regard - Application disposed off.

Summary

Issues Involved:
1. Legitimacy of the plaintiff's claim and the interlocutory petition.
2. Allegations of collusion between the plaintiff and the third defendant.
3. Financial condition of the defendant companies and implications of the mortgage with Reliance Commercial Finance Limited (R-Com).
4. Validity and enforceability of the letter dated November 15, 2014.
5. Appropriateness of the ex parte ad interim order dated May 17, 2017.
6. Costs and punitive measures against the plaintiff for misuse of the court process.

Detailed Analysis:

1. Legitimacy of the Plaintiff's Claim and the Interlocutory Petition:
The plaintiff claimed to have invested ?21 crore in a real estate project by the defendants, expecting the project to be completed by December 2016. The plaintiff alleged that the defendants failed to commence construction and later agreed to refund the amount with interest and compensation. The court found the plaintiff's narrative dubious and concluded that the plaintiff's action was instituted with "sinister motive and oblique purpose."

2. Allegations of Collusion Between the Plaintiff and the Third Defendant:
The court noted allegations of collusion between the plaintiff and the third defendant, suggesting that the action was a "vicious plan devised in the name of the plaintiff to aid the third defendant." The court found evidence of a coordinated effort to mislead the court, including the timing of the suit and the ex parte order obtained just before the summer vacation.

3. Financial Condition of the Defendant Companies and Implications of the Mortgage with R-Com:
The plaintiff's interlocutory petition highlighted the poor financial condition of the defendant companies. The second defendant and R-Com contended that the bypass property was mortgaged to R-Com, which had advanced substantial funds for the project. The court observed that the plaintiff's claim had no nexus with the bypass property and was an attempt to prejudice the rights of R-Com.

4. Validity and Enforceability of the Letter Dated November 15, 2014:
The court scrutinized the letter dated November 15, 2014, which purportedly promised repayment with interest and compensation. The court found the letter "prima facie not enforceable against the defendant No. 2" and questioned its authenticity, suggesting that the documents relied upon by the plaintiff might have been created after the plaint was prepared.

5. Appropriateness of the Ex Parte Ad Interim Order Dated May 17, 2017:
The court criticized the ex parte ad interim order obtained by the plaintiff, stating that it was an exception and not the rule. The court emphasized that such orders should be of limited import and proportionate to the claim. The court concluded that the order was "overwhelmingly disproportionate" and that the plaintiff's conduct was an "affront to the system."

6. Costs and Punitive Measures Against the Plaintiff for Misuse of the Court Process:
The court imposed punitive and exemplary costs of ?15 lakh each to the second defendant and R-Com, to be paid within four weeks, failing which interest at 18% per annum would be applied. The court expressed regret over the erosion of traditional filters before matters reached the court and stressed the shared responsibility of the Bench and the Bar to prevent unjust causes from being espoused in court.

Conclusion:
The court affirmed the judgment and order dated September 5, 2017, vacating the ex parte ad interim order of May 17, 2017. The plaintiff's interlocutory application was dismissed, and the receiver appointed by the impugned order was discharged. The court's decision underscored the importance of integrity in judicial proceedings and the need to deter vexatious litigation through punitive costs.