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TMI Blog2020 (10) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... d or not can only be known after a pleading, in that behalf, is made which is tested, based on evidence led by parties - it is only when the fraud got unravelled in August-September 2010 could the material particulars as to how the fraud was employed have been pleaded as is the requirement under Order VI Rule 4 of the CPC. The date concerning the discovery of fraud is crucial as the limitation under Article 59 in line with Section 17 of the 1963 Limitation Act would commence only from that date. The argument that fraud with reasonable diligence could have been discovered earlier is untenable in the instant case as there nothing on record to demonstrate that the plaintiffs were aware of the fact that the stamps affixed on the transfer deeds produced in Court were not printed around the same time when the transfer deeds were purportedly executed. The suit is prima facie within limitation. The plaint cannot be rejected on the ground of limitation without testing the averments made in the plaint and the documents appended thereto at the trial. Whether or not the transfer deeds concerning 260 shares are genuine documents? - HELD THAT:- Section 17 of the 1963 Limitation Act [w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng. 4. Therefore, to appreciate the various submissions raised on behalf of the parties by their respective counsel qua this application, certain dates, events and facts are required to be noticed. Background facts: - 5. The Company was incorporated on 19.06.1959 with an authorized capital of ₹ 1, 00,000/- divided into 1, 000 shares of ₹ 100/- each. The issue and paid-up capital was, however, restricted to ₹ 1, 500/- comprising 15 shares of ₹ 100/- each. Out of the 15 shares, 10 shares were issued to Smt. Satya Chowdhry, the wife of CBP, who was also the first Chief Minister of Delhi. The remaining 5 shares were issued to one, Shri Kishori Lal Sachdeva. 5.1 In course of time, the Company made further allotment of shares. Consequently, on 20.05.1962 the Company allotted 500 shares [as noticed above] in favour of CBP bearing distinctive numbers 61 to 560. 5.2 CBP, in turn, transferred the 500 shares allotted to him in favour of the Society. This is how the Society became the owner of the disputed 500 shares. 6. After the death of CBP on 11.08.1993, an uneasy calm prevailed between the Company and its significant [or so it thought] stakeho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ceased to be its shareholder since 1990. 8.1 One of the major planks of the Company s defence was that the transferees of the shares had not been arrayed as parties to the company petition and, hence, it was not maintainable. 8.2 It is important to note that the reply on behalf of the Company was signed by Mr. Janardhan Rai, who, as indicated above, was arrayed as respondent no. 2 in the company petition. 9. The CLB, however, via an order dated 16.03.1998, passed in the aforementioned company petition, directed the Company to produce its register of members for inspection by the authorized representative of the Society. Furthermore, the Company was also directed to furnish a copy of the register of members so that the Society could implead relevant persons as parties to the said proceedings. 10. The record filed seems to suggest that the original register of members was not produced by the Company and, therefore, vide order dated 20.04.1998, the CLB directed the Company to reconstruct the register of members with information already submitted. The CLB further directed the Company to offer inspection to the Society on 14.05.1998. 10.1 Pertinently, on behalf of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. 14.1 This fact was communicated, by the Company to the Society vide letter dated 26.05.2006, wherein, in the operative part, the following was noted. Conclusion: The board of directors shall take on record the shares of the society in the register of members after adhering to the procedures and provisions of the Companies Act, 1956, applicable rules, regulations and/pr department clarification/notification so far as applicable in this situation. Sd/- Ajay Yadav Director 14.2 As a result of the change in circumstances, the Society on 29.05.2006, informed the CLB, through its advocates that it wished to withdraw the company petition. 14.3 At this hearing, the Company was represented by its chartered accountant one, Mr. T.S.V. Panduranga Sarma. Mr. Sarma not only appeared for the Company and its director in the previous hearing held before the CLB but also signed pleadings in his capacity as its attorney. 15. However, within a few weeks, the then-secretary of the Society Mr. Siddharth Chowdhry moved an application before the CLB on 20.06.2006 for recall of the order dated 29.05.2006, whereby, the company petition had been dismissed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd of the Company on 08.08.1982. Despite which, this crucial information was not articulated by the Company in its reply to the company petition filed before the CLB. 22. On 18.12.2007, counsel for Promila Kishore, Ankur Sachdeva and O.P. Sachdeva, informed the Court hearing the 2006 suit that they did not have, in their possession, any other document apart from the ones which had been filed with affidavit dated 11.12.2007 in conformance with the order dated 20.09.2007. 23. The record shows that transfer deeds were filed on 01.08.2008 qua 260 shares out of a total of 500 shares. The details of transfer, as captured in these documents and as adverted to in the plaint filed in the instant suit action, reveal the following. S. No. Transferor No. of Shares Transferred Transferee Date of Transfer i. Society 150 CBP 26.02.1968 ii. Society 30 Susheel Khera [D-4] 29.01.1974 iii. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Press vide two separate communications dated 27.09.2010 and 22.11.2010. The replies revealed that 50 paisa, 25 paisa, and ₹ 2 stamps affixed on the transfer deeds were printed, for the first time, in 1978-1979. 29. Since this information did not square-up with the stand that transfer of 260 shares was effected between 1969-1974, the Society decided to file the instant suit action. The present suit was, accordingly, instituted on 18.05.2012. 30. In the written statement filed by defendant no. 6 and 7 [i.e. Ankur Sachdeva and O.P. Sachdeva] on 20.11.2012, the stance adopted was one of complete denial. The accusation of forgery/fabrication was refuted. 31. Two years hence i.e. on 07.05.2014, the Company filed the captioned application. 32. On that very date i.e. 07.05.2014, defendant nos. 4 to 6 in the 2006 suit [i.e. Ajay Yadav, Abdul Haq Farhan and Surender Pal respectively] moved an application i.e. I.A. No. 9315/2014 under Order VI Rule 17 of the CPC to amend their written statement. The amendment sought was to incorporate the factum of forgery and fabrication of the transfer deeds. 32.1 Furthermore, Ajay Yadav, Abdul Haq Farhan and Surender Pal, i.e. defenda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendment to the written statement filed on behalf of defendants nos. 4 to 6 in the 2006 suit (i.e. Ajay Yadav, Abdul Haq Farhan and Surender Pal respectively) was sustained], preferred a Special Leave Petition i.e. SLP (C) No. 29564/2018. 41.1 This SLP was dismissed on 19.11.2018, resulting in the order dated 08.08.2018, passed by this Court, being upheld. 42. Likewise, the SLP filed by defendant nos. 4 to 6 in 2006 suit [i.e. Ajay Yadav, Abdul Haq Farhan and Surender Pal respectively] against the order dated 24.09.2018, passed in CM (M) No. 1157/2018 was dismissed on 21.01.2019. Liberty was, however, given to seek expeditious hearing of the 2006 suit. 43. On 07.03.2019, the Single Judge disposed of the application [i.e. I.A. No. 4334/2019] filed by defendant nos. 4 to 6 [i.e. Ajay Yadav, Abdul Haq Farhan and Surender Pal respectively] under Order XXXIX Rule 4 of the CPC in the 2006 suit. The Court, via this order, restrained both the plaintiffs and the defendants in the 2006 suit from selling the properties of the Company till the disposal of the suit. Besides this, the Court directed transfer of another suit pending between the parties in the District Court i.e. CS No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety filed the suit bearing no. 141/1986 against the Company seeking cancellation of the sale deed executed by it. (iv) The filing of annual returns by the Company constituted constructive notice to the Society about the status of subject 500 shares. Reference, in this regard, was made to annual returns filed by Company between 1968 and 1990. (v) The Division Bench, in its order dated 06.11.2009, passed in FAO (OS) 337/2009, had also referred to the factum of the Society instituting suit no. 141/1986 in the District Court to claim cancellation of the sale deed. (vi) The issued and paid-up capital of the Company was increased from time to time. In this context, it was stated that the Company, on the following dates, had issued shares as referred to hereafter. S.No. Date Shares issued by Company 1. 31.07.1959 15 2. 1962 560 3. 1975 815 4. 1983 965 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were produced. If any of these dates are taken as the starting date for limitation, the instant suit has been instituted, clearly, beyond the prescribed period. (x) The period of limitation commences from the date when the right to sue first accrues. Successive violations do not give rise to a fresh cause of action. [ See: Razia Begum vs. Delhi Development Authority, 2013 (139) DRJ 340] (xi) To ascertain as to when the real cause of action arises, the Court has to carry out a meaningful reading of the plaint. [ See: Hardesh Ores vs. Sociedade De Fomento Industrial Pvt. Ltd., 2007 (5) SCC 614] (xii) The supposed discovery of fraud in September 2010, pursuant to a response received to an RTI application from Indian Security Service, cannot extend the period of limitation. The Society s case is that it did not execute the transfer deed; an aspect which it articulated right since 1997 when the company petition was filed before the CLB. (xiii) The annual returns filed with the ROC by the Company constituted constructive notice insofar as the Society was concerned. Society could have discovered the transfer of shares if it had exercised due diligence in the ordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sargula Transport Service vs. State Transport Appellate Tribunal Gwalior and Ors., AIR 1989 SC 88] (xxii) Order II Rule 2 of the CPC would also come in the way of the Society in pressing the reliefs claimed for in the instant suit as they arise from the same cause of action which was articulated in the company petition by the Society. 47. Mr. Mohan, on the other hand, emphasized the fact that at every stage, defendant nos. 1, 6, 7 and the Company chose to keep back correct facts till such time, specific orders were passed by the concerned forum. In this behalf, Mr. Mohan drew my attention to the order of the CLB dated 16.03.1998 whereby the Company was directed to furnish the register of members and order of the CLB dated 31.05.2002 whereby the Company was directed to produce transfer deeds concerning the subject 500 shares. 47.1 Likewise, reference was made to order dated 20.09.2007, passed in the 2006 suit, whereby defendant nos. 1, 6 and 7 i.e. Promila Kishore, Ankur Sachdeva and O.P. Sachdeva were directed to place on record the original transfer deeds. 47.2 This resulted in Mr. O.P. Sachdeva i.e. defendant no. 7 filing an affidavit dated 11.12.2007. In the aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, the transfer deeds produced were, obviously, forged and fabricated. 48. In respect of the purported fraud alleged to have been committed in the generation of the transfer deeds concerning 260 shares, reference was made to the replies dated 27.09.2010 and 22.11.2010 furnished by the Indian Security Press in response to the RTI applications of the Society dated 27.08.2010 and 22.10.2010. 49. It was submitted, that the Society discovered the fraud only when the responses were received from the Indian Security Press on 27.09.2010 and 22.11.2010. It was, thus, contended that the Society's case fell within Article 59 and Section 17 of the Limitation Act, 1963 [in short 1963 Limitation Act ]. It was also contended, that if fraud had to be alleged by the Society, it could only be done once it was discovered. 50. The submission was that without material particulars, fraud could neither be alleged [as required under Order VI Rule 4 of the CPC] nor established. Therefore, the contention advanced on behalf of the Company was untenable since the transactions-in-issue which are assailed on the ground of fraud could be assailed only when the material particulars of the fraud were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dant no. 1, were the promoter-directors of the Company which was incorporated on 10.07.1959. 52.2 There, is also no dispute about the fact that on 20.05.1962, the Company allotted 500 shares to CBP. 52.3 It, is also an accepted fact that on 24.07.1963, CBP transferred the 500 shares allotted to him to the Society. 53. The disputes between Choudhary s and Sachdeva s, erupted within a couple of years of the demise of CBP who died on 11.08.1993. 54. The Society, it appears, discovered, in and about April-June 1997, that its name, as the shareholder of the Company, does not find mention in the annual return filed by the Company with the ROC. This propelled the Society to file a company petition, in the CLB, under Section 108 and 111(4) of the 1956 Act, on 04.06.1997, for rectification of the record. 55. At that juncture i.e. when the company petition was filed, the Company was, perhaps, under the sway of Sachdevas, therefore, in the reply filed on 21.10.1997 the stand taken was that the shares of the Society had already been transferred. However, the CLB did not let the matter rest at that and vide order dated 16.03.1998 directed production of the register of members of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny had produced, if not the entire record, a part of the original record, whereas, the Society, even though it claimed it had the original share certificates in its possession, had not produced the same. 62. The fact that the Society did not produce the original script which referred to the subject 500 shares had significance, to my mind, when the conduct of the parties was being examined at the stage of grant of interim injunction in the 2006 suit. This aspect lost relevance after the Company, via its affidavit dated 06.04.1998, took the stand that it had split the single share certificate concerning 500 shares into 100 scripts comprising 5 shares each in 1968 and that over time these shares had been transferred to other persons leaving no shares to the credit of the Society after 1989-1990. 63. This stand of the Company and the Sachdevas, at least at this juncture, seems to be facially dented given the report dated 23.05.2017 prepared by the forgery detection cell of the Indian Security Press. 64. As noted above, the position changed when the Indian Security Press, in response to the RTI applications filed on behalf of the Society, reported that the stamps affixed on tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad acted irregularly and illegally and perhaps beyond the authority conferred upon him. What was concealed from the Society was that the very documents i.e. the transfer deeds which were produced before this Court pursuant to order dated 20.09.2007 were a product of fraud. 68.2 This assertion, made on behalf of the Society, has a ring of credibility in it given the affidavits filed before the CLB on behalf of the Company that its records including the register of members had been destroyed in a fire accident, coupled with the fact, that the split share scripts were not produced despite a specific order of CLB dated 31.05.2002. The U-turn of the Sachdevas in bringing to fore details of transfer concerning 260 shares out of 500 shares only lend credence to Society s stand that it was unaware of the fraud being employed by them. As a matter of fact, the Society rightly contends that the fraud has not been unravelled to the full extent as even now it is not known as to what happened to the remaining 240 shares. 69. Thus, when the issue is examined from this perspective, Mr. Mohan s contention that Section 17 of the 1963 Limitation Act gives leeway to the party seeking to institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was known, firstly, fraud had been committed and secondly, the modus operandi employed to execute the same. 73. The date concerning the discovery of fraud is crucial as the limitation under Article 59 in line with Section 17 of the 1963 Limitation Act would commence only from that date. The argument that fraud with reasonable diligence could have been discovered earlier is untenable in the instant case as there nothing on record to demonstrate that the plaintiffs were aware of the fact that the stamps affixed on the transfer deeds produced in Court were not printed around the same time when the transfer deeds were purportedly executed. 74. It has to be borne in mind that striking out a claim on the ground of limitation prevents adjudication of the claim on merits. Being a statute of repose, the benefit of interpretation should inure to the claimant where the provision is amenable more than one outcome. 75. Therefore, to my mind, the suit is prima facie within limitation. The plaint cannot be rejected on the ground of limitation without testing the averments made in the plaint and the documents appended thereto at the trial. 76. It is trite to say that to adjudicate u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avour of the Society when it discovered that it was not included in the list of shareholders which formed part of the public record. Thus, the argument was that once the limitation commences, it cannot be stalled or put in abeyance. By itself, one can find no fault with this proposition articulated by Mr. Ganju. 82. The 1963 Limitation Act has, however, carved out an exception in the case of a concealed fraud. If a document which impacts the rights of a person in a property is concealed from him, its discovery provides a fresh cause of action for the institution of a suit. This principle has found articulation in a Privy Council judgement rendered in the matter of Punchi Hamine vs. Ukku Menika, LEX / SLCA / 0033/1926. 82.1 Briefly, the facts obtaining in this case were as follows. i. One, Punchirala who was the owner of the land in question had gifted the same in 1883 in equal measure to his 3 sons Appuhamy, Kiri Banda and Punchi Appuhamy. This deed was unregistered. In 1884, that very land was sold and transferred to his 3 sons who were minors. ii. Subsequently, one of his sons Appuhamy died. At the time of his death, Appuhamy was a bachelor. His other son Kiri Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of the estate of her son who had died in the meanwhile for setting aside the compromise decree on the ground that it had been obtained by fraud and collusion. Consequential relief by way of share in the land was also sought. vii. The defendant in the suit was the widow of Punchi Appuhamy. The defence raised was that the land had been gifted to her husband Punchi Appuhamy based on which a compromise decree was passed and therefore the suit was barred by res judicata and limitation. 82.2 The Privy Council while dealing with the issue of limitation ruled that discovery of a concealed fraud gave rise to a fresh cause of action and, hence, the limitation would run only when the fraud became known to Punchi Hamine. 83. Interestingly, in this case, it was sought to be argued that the sale deed of 1884 could have been discovered by Punchi Hamine had she searched the register of deeds. 83.1 This argument is very similar to the submission made before me that the alleged fraud could have been discovered had an enquiry been made with the Indian Security Press immediately after the transfer deeds concerning 260 shares were produced in Court by Sachdevas/Company. 83.2 The re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccessor in title to Sirisena. As the action was only brought in 1924, both causes of action would, therefore, be barred by prescription. But, in my opinion, the rule under our law in the case of concealed fraud is not as contended for by learned Counsel. A cause of action arises on the discovery of the concealed fraud. It is conceded that under the English Law, as administered by the Courts of Equity, this is so: Thus in Ralfe v. Gregory, (1865) 4 D.J. S. 576 (579). Westbury L.C. said: As the remedy is given on the ground of fraud, it is governed by this important principle that the right of the party defrauded is not affected by lapse of time, or generally speaking, by anything done or omitted to be done, so long as he remains, without any fault of his own, in ignorance of the fraud that has been committed, and in Bullicoal Mining Co. v. Osborne, (1899) A.C. 351. Lord James of Hereford delivering the judgment of the Judicial Committee said: The contention on behalf of the appellants that the statue is a bar unless the wrongdoer is proved to have taken active measures in order to prevent detection (of a concealed fraud) is opposed to common sense as well as to the prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion he was directly responsible. This question would not have arisen if the discovery of the fraud did not give a cause of action. The English principle, which I have stated above, therefore, applies to this case, and the cause of action must be regarded as having accrued on the discovery of the fraud and the cause of action to have the decree set aside is not barred by prescription. I have thought it necessary to discuss the effect of the judgment in Dodwell's case, as section 118 of the Trust Ordinance was not referred to at the argument, and its application to the present case was not discussed. But I have little doubt that it applies and must be given effect to. 83. I must here refer to the judgement of the Supreme Court rendered in Yeswant Deorao Deshmukh vs. Watchand Ramachandd Kothari, MANU/SC/0033/1950 which was cited by Mr. Ganju to buttress his argument that the starting point of limitation on the ground of fraud gets shifted only when the fraud committed prevents the revelation of the knowledge of the right available to the litigant to institute an action. 83.1 A close perusal of the facts obtaining in Yeswant Deorao case would show that the decree hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 83.4 Clearly, the said judgement is distinguishable on facts and insofar as the first aspect is concerned, to which I have made a reference above, it supports the case of the Society. 84. Likewise, the judgement of the Karnataka High Court in the matter of Babulal Vaktaji Shah and Ors. vs. Chandabai, MANU/KA/0121/198 9 is distinguishable on facts. This was a case where the respondent/plaintiff had filed a suit for rendition of accounts qua a partnership firm in which her husband was a partner. Upon the death of her husband, the remaining partners, according to the respondent/plaintiff, assured her that she had been included as a partner in the newly constituted firm a fact which, later on, proved to be false. This propelled institution of a suit for rendering accounts. 84.1 The courts below, while rejecting her claim in the new firm, sustained her claim for accounts to the extent of the share of her deceased husband. The objection taken by the appellant/defendant that the suit was barred by limitation was rejected by the courts below by taking recourse to Section 17 of the 1963 Limitation Act. The High Court reversed the view of the courts below on the ground that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gdu Paralkar vs. State of Maharashtra and Ors., MANU/SC/0495/2005)] 13. In Lazarus Estate Ltd. v. Beasley (1956) 1 QB 702, Lord Denning observed at pages 712 713, No judgment of a Court, no order of a Minister can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. In the same judgment Lord Parker L J observed that fraud vitiates all transactions known to the law of however high a degree of solemnity. (page 722) 87. Therefore, to close the instant suit, at this juncture, by allowing the captioned application, would cause, to my mind, serious impediment in the examination that the Court would be called upon to conduct about the genuineness of the documents-in-issue i.e. the transfer deeds. Conclusion : - 88. Thus, given the foregoing discussion, I am of the view that the prayer made in the captioned application lacks merit and hence deserves to be dismissed. It is ordered accordingly. 89. It is, however, made clear that observations made hereinabove will not impact the trial of the suit on merits. ---------------- Notes: 1. 1.6 The Company has been duly maintaining its statutory records including Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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