2018 (2) TMI 2082 - HC - VAT and Sales Tax

Default in repayment of loan - forcible possession - Rule 9(1) of the Contempt of Courts (Bombay High Court) Rules 1994 - HELD THAT - It is beyond all doubt that the entire process of invocation of Arbitration on a non-existent so-called oral agreement and obtaining within one day a reference to Arbitration a hearing before the Arbitrator and within two days an Arbitral Award and then promptly obtaining an appointment of the Receiver all had one and only one objective to prevent Fullerton from recovering its dues. There was no other purpose. All manner of submission are attempted today including telling me that Fullerton has an understanding with Tornado Motors. Then Mr Agrawal for the Claimant Prithipal with the same alacrity that his son-in-law displayed in consenting to the flat going into Receivership agrees to that very order - one that he sought on the ground that the flat needed to be protected - being vacated. This is nothing but playing ducks and drakes with the Court and its processes. List the matter for compliance on 15th February 2018.

Summary

Issues Involved: Error in previous order, commercial fraud, secured creditor rights, arbitral award legitimacy, contempt of court, fraudulent transfer of property, and criminal proceedings.

1. Error in Previous Order:

The court identified an error in the order dated 5th February 2018, specifically in paragraph 1, line 2, where the words "no party" were to be deleted.

2. Commercial Fraud:

The case exemplifies commercial fraud and fraud on the Court, highlighting a deeply flawed state of commercial litigation.

3. Secured Creditor Rights:

Fullerton India Credit Company Ltd ("Fullerton") sought to lift an attachment on a flat mortgaged to it by Jitenderpal Singh Chadha ("Jitenderpal"). Fullerton, a secured creditor, had sanctioned a loan to Tornado Motors Pvt Ltd ("Tornado") with Jitenderpal as a co-borrower. The flat was initially mortgaged to IndiaBulls Housing Finance Limited, which was later redeemed using part of Fullerton's loan.

4. Arbitral Award Legitimacy:

Jitenderpal defaulted on the loan, prompting Fullerton to initiate measures under the SARFAESI Act 2002. Jitenderpal then claimed an Arbitral Award dated 6th November 2014 in favor of Prithipal Surenderpal Chadha ("Prithipal"), his father-in-law, based on an alleged oral agreement for the sale of the flat. The court found the award to be a pre-planned exercise to perpetrate fraud, noting its astonishing and remarkable nature, and the rapid sequence of events leading to the award.

5. Contempt of Court:

The court noted that the entire arbitration process was orchestrated to prevent Fullerton from recovering its dues, thus compromising and corrupting the court's process. The court issued Suo Motu Notice under Rule 9(1) of the Contempt of Courts (Bombay High Court) Rules, 1994, against Prithipal, Jitenderpal, and Advocate Dattatray R Parab, requiring them to show cause why they should not be punished for contempt of court.

6. Fraudulent Transfer of Property:

The court highlighted the fraudulent nature of the transfer, referencing the Supreme Court's decision in Ramesh Kumar & Anr v Furu Ram & Anr, which states that a collusive, bogus, and non-genuine award cannot be made a rule of the court. It also cited BN Srikrishna J's decision in SBI Home Finance Ltd v Credential Finance Ltd & Ors, indicating that a separate suit is not required to address fraudulent transfers.

7. Criminal Proceedings:

The court directed the Registrar (Judicial-I) to report by 12th March 2018 on possible criminal actions against Prithipal and Jitenderpal. The decision on criminal proceedings against Advocate Parab was deferred to the next date.

Judgment Orders:

1. The court allowed the Chamber Summons in terms of prayer clauses (a), (b), and (c), raising the warrant of attachment, discharging the Court Receiver, and directing the handover of possession to Fullerton.
2. The Court Receiver was instructed to deliver vacant possession of the flat within 48 hours, with police assistance if necessary.
3. Jitenderpal undertook to vacate the flat by 5:00 p.m. on 14th February 2018, failing which the Court Receiver would evict him.
4. The court emphasized that fraudulent conduct by litigants would be dealt with swiftly and without mercy.

Conclusion:

The court condemned the fraudulent actions of Jitenderpal and Prithipal, emphasizing the importance of integrity in judicial proceedings and the severe consequences of attempting to defraud the court. The matter was listed for compliance on 15th February 2018.