SICPA INDIA PRIVATE LTD. vs. KAPIL KUMAR & ORS.

.* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: July 01, 2014
+ I.A. No.478/2011, I.A. No.6654/2011, I.A. No.6657/2011,
I.A. No.20809/2011, I.A. No.274/2012, I.A. No.15011/2010,
I.A. No.15012/2010 and CS(OS) 2277/2010

SICPA INDIA PRIVATE LTD ..... Plaintiff
Through Mr.C.Mukund, Adv. with Mr.Ashok
Kumar Jain, Adv.

versus

KAPIL KUMAR & ORS ..... Defendants
Through Mr.Sandeep Sethi, Sr. Adv. with
Ms.Lakshmi Gurung, Adv. and
Mr.Sujeet Kumar Mishra, Adv. for
D-1 to D-3.
Mr.Maninder Singh, Sr. Adv. with
Mr.Vikas Arora, Mr.Manish,
Mr.Mohit Taneja, Mr.Varun and
Mr.Arpit Maheshwari, Advs. for D-
6.
Mr.T.K.Ganju, Sr.Adv. with
Mr.Salil Seth and Mr.Rajarshi
Bhuyan, Advs. for proposed D-7.
Mr.Arav Kapoor, Adv. for ICICI.
CORAM:
HON'BLE MR. JUSTICE MANMOHAN SINGH

MANMOHAN SINGH, J.
1. By this order, I propose to decide the following application filed
by the parties to the suit. The details of the same are mentioned
below :
Applications filed by plaintiff :
i. I.A. No.15011/2010 (Order XXXIX Rule 1 & 2 r/w S 151 CPC)
CS(OS) No.2277/2010 Page 1 of 51


ii. I.A. No.15012/2010 (Order II Rule 2 r/w S 151 CPC)
iii. I.A. No.478/2011 (Order I Rule 10(2) CPC)
iv. I.A. No.274/2012 (Order VI Rule 17 r/w S 151 CPC)
Applications filed by D-1 to D-3 :
i. I.A. No.6654/2011 (Section VIII of Arbitration & Conciliation Act,
1996)
ii. I.A. No.6657/2011 (Order I, Rule 10 r/w S 151 CPC)
iii. I.A. No.20809/2011 (Order VII Rule 11 r/w S 151 CPC)
nd
2. The plaintiff on 2 November, 2010 filed a suit for declaration
and permanent injunction against the six defendants namely Mr.Kapil
Kumar, Mrs.Ritu Kumar, M/s. Brushman (India) Ltd., ICICI Bank Ltd.,
DLF Ltd. and M/s. Genesis Finance Company Ltd. The reliefs
claimed by the plaintiff in the suit are :
(a) A decree of declaration is claimed in respect of the
property in question claiming a second charge of the
plaintiff and further that defendant Nos.4, 5 and 6 are
bound to take note of the said second charge in their
records.
(b) Mandatory injunction directing defendant Nos.4, 5 and 6
to record in their books of account, the name of plaintiff
as the second charge holder.
(c) A decree of permanent injunction seeking restraint
against the defendant Nos.1 and 2 from selling,
transferring, conveying and/or creating third party
interest in respect of the property in question.
3. Brief facts of the present case as per the plaint are that the
plaintiff lent and advanced to defendant No. 3, i.e. M/s Brushman
(India) Limited through its Managing Director, defendant No.1, a sum
th
of Rs.5,00,00,000/- by way of a Loan Agreement dated 27 August,
CS(OS) No.2277/2010 Page 2 of 51


2008. After expiry of the term of repayment, the defendant No.3
requested plaintiff to roll over the loan for a further period of three
months in view of the fact that it was not in a position to repay the
th
loan amount. Accordingly, a fresh loan agreement dated 27
November, 2008 was entered into. Again on expiry of three months,
the defendant No. 3 was not in a position to re-pay, and so the loan
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was re-rolled for a further period of 124 days commencing from 27
February, 2009 with additional security, inter alia, by way of second
charge over two suit properties situated at D-6/2, Vasant Vihar, New
Delhi and another at Penthouse No. 1917-A (New No. 1923-A), DLF,
Magnolias, Gurgaon. Defendants No.1 and 2 alongwith Mrs. Raj Rani
th
executed letter of guarantees all dated 27 February, 2009 in favour
of the plaintiff. The first charge of the suit properties was with ICICI
Bank i.e. defendant No.4 in the present suit.
4. On the same day, the defendants No.1 and 2 also executed an
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agreement to sell dated 27 February, 2009 in respect of ground floor
of the Vasant Vihar property in favour of the plaintiff and also
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executed a General Power of Attorney dated 27 February 2009 in
favour of the plaintiff in respect of both the suit properties.
5. It is alleged in the plaint that defendants No. 1 and 2 took
further loan from defendant No.6 against the suit properties, which
they used to clear the dues of ICICI bank i.e. defendant No.4.
Defendant No.6 is understood to have become the first charge holder
of the aforesaid two suit properties. On expiry of the said 124 days,
defendant No.3 was unable to repay debts. Various reminders were
given to repay the loan amount together with accrued interest,
however, no steps were taken to clear the dues of the plaintiff.
CS(OS) No.2277/2010 Page 3 of 51


6. Plaintiff called up the depository participants of the company,
namely Abhipra Capital to transfer shares of 10,00,000 of defendant
No.1 and 8,75,000 of Mrs. Raj Rani in favour of the plaintiff. Plaintiff
thereafter sold the shares pledged with it. 18,74,000 shares were sold
th
upto 17 May 2010 for a sum of Rs.1,69,95,042/- and 1,000 equity
th
shares were held by the plaintiff. Accordingly, as on 30 September,
2010, a sum of Rs.5,56,55,973/- remained due and payable by
defendant No.1 to 3 to the plaintiff.
th rd
7. On 4 March, 2010, the plaintiff received a letter dated 23
February, 2010 whereby the guarantors, defendants No.1 and 2
informed the plaintiff that they have got the buyer for Vasant Vihar
property and it was suggested to the plaintiff that out of the sale
proceeds, amount would be paid to ICICI Bank and M/s Genesis
Finance Co. Ltd. (defendant No.6), respectively against loans taken
for the Vasant Vihar property. A total of Rs.5 lacs would be re-paid to
the plaintiff including the balance of Rs.2 lacs from the sale proceeds
after repayment to ICICI Bank and M/s Genesis Finance Co. Ltd.
8. It is alleged in the plaint that the plaintiff did not give his consent
to sell the suit properties and continued to demand its debt from
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defendants No. 1 to 3. Plaintiff by letters dated 9 March, 2010 and
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6 April, 2010 called upon the defendants No.1 and 2 to produce
relevant documents in respect of the said sale, if any. Thereafter, the
plaintiff tried to contact the defendants No.1 to 3 but the said
defendants neither attended the calls of the plaintiff nor met the
th
plaintiff’s representative. Plaintiff by letter dated 10 June 2010
conveyed to the defendants No.1 and 2 that the plaintiff be informed
about the status of ownership of the suit properties, failing which
CS(OS) No.2277/2010 Page 4 of 51


public notice would be published in the newspaper intimating the
general public about the second charge over the suit properties
created in favour of the plaintiff. Thereafter, plaintiff vide letter dated
th th
6 July 2010 reiterated the statements made in the letter dated 10
June 2010, however, inspite of receipt of the said letters, defendants
did not disclose the status of the suit properties.
rd
9. Accordingly on 23 July, 2010 a public notice was published in
Hindustan Times in English and in Hindustan in Hindi. After the said
publication, plaintiff received telephone calls from few persons
intimating that they were negotiating for purchase of the suit
properties from defendants No.1 and 2 and they wanted to verify the
status of the properties. In view of the malafides of the said
defendants, the plaintiff filed the present suit for injunction restraining
the defendants No.1 and 2 from selling the suit properties in the
market and from creating any third party interest thereupon.
10. The defendant No.4 is impleaded by the plaintiff for the reason
that the suit properties are mortgaged as first charge. The defendant
No.6 was added as a party, as the plaintiff came to know that
defendants No.1 and 2 have taken loan from defendant No.6 and
cleared the dues of defendant No.4. Defendant No.5, DLF Ltd.,
according to plaintiff, is also a necessary party as the defendants
No.1 and 2 have purchased the property i.e. Penthouse No.1917A
(New number 1923A) Magnolias, Gurgaon and that some amount is
still due and payable by the defendants No.1 and 2 to the defendant
No.5. The plaintiff approached the defendant No.5 to register the
second charge of the plaintiff who refused to do so.
CS(OS) No.2277/2010 Page 5 of 51


nd
11. The suit was filed on 2 November, 2010. The same was listed
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on 10 November, 2010. Summons and notice were issued to the
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defendants for 16 November, 2010. No interim order was passed.
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It was recorded in the order dated 16 November, 2010 that notice
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could not be issued. Fresh notices were issued for 9 December,
2010. On that date all defendants through their counsel appeared
before the court. Defendants No.1 to 3 informed the court that in
order to settle the accounts of both the defendants No.4 and 6, both
the suit properties have been sold. The statement was also made by
defendant No.6 that it has further sold the Vasant Vihar property to
th
Mr.K.L. Chugh on 7 December, 2010 as he has to generate funds
with a view to liquidate the loans of defendant No.1 to 3.
12. The plaintiff states that after filing of the suit, subsequent events
and facts, which were not in the knowledge of the plaintiff, came to be
in the knowledge of the plaintiff at the behest of the defendants,
therefore, the plaintiff intends to place on record such subsequent
facts and documents and seeks necessary additional reliefs by
amending the plaint and to implead Mr.K.L. Chugh as defendant No.7
and seeks additional reliefs against him as the subsequent purchaser
becomes a necessary party to be impleaded in the present suit. The
plaintiff also seeks a relief in the proposed amended plaint that sale
th
deed dated 7 December, 2010 be declared null and void and that
the same is unenforceable as per averments made in the proposed
plaint to this aspect. Though through court process the defendants
were not served, but on the date of execution of sale-deed, they were
aware about the pendency of suit in view of information given by the
plaintiff by issuance of letter.
CS(OS) No.2277/2010 Page 6 of 51


13. It is the case of the plaintiff that each relief being sought for by
the plaintiff in the instant suit is based on defendants’ breach of its
th
contractual obligations under the three loan agreements dated 27
th th
August 2008, 27 November, 2008 and 27 February, 2009,
th
concerning recovery of money, as also agreement to sell dated 27
February, 2009, relating to sale of ground floor of the Vasant Vihar
Property executed by defendant Nos.1 and 2 in favour of the plaintiff.
14. It is alleged in the plaint that the property at Penthouse
No.1917-A, (New No.1923-A), DLF, Magnolias, Gurgaon is claimed
to have been purchased by defendant No.6 before filing the suit as
alleged in the written statements. Thus, the plaintiff is entitled to seek
relief of recovery of money under the loan agreements as also relief
of specific performance. The same was deferred by reserving liberty
to pray for such reliefs by filing of an application under Order 2 Rule 2
CPC, being I.A.No.15012/2010, which was filed along with the suit
reserving liberty to seek other reliefs including the relief of specific
performance.
In the application, being I.A. No.478/2011, the plaintiff seeks
impleadment of Mr.K.L. Chugh, subsequent purchaser of property at
th
Vasant Vihar, vide sale deed dated 7 December, 2010 (proposed
defendant No.7). While I.A. No.274/2012 is the application for
amendment of the suit under Order 6 Rule 17 CPC which is also filed
by the plaintiff at subsequent stage.
15. As per record only defendant No.6 has filed the written
statement who has raised various preliminary submissions. The
averments made in the written statement are totally opposite to the
statement made in the plaint. The defendant No.6 has also filed the
CS(OS) No.2277/2010 Page 7 of 51


original documents in support of its case. It is stated in the written
statement that the suit of the plaintiff is totally misconceived, false,
frivolous and not maintainable. The extract of averments made in the
preliminary submissions is mentioned below : -
i) That Defendants 1 & 2 approached the answering
defendant for availing loan facility in September 2006.
After due diligence done by the answering defendant and
negotiations, the answering defendant lent
Rs 2,50,00,000/- ( Two Crores Fifty Lacs only) to the
Defendants No. 1 & 2 on mutually agreed terms and
conditions and against the equitable mortgage of Pent
House No. 1917-A (Now re-numbered as 1923-A) DLF
th
Magnolias, Gurgaon vide loan agreement dated 26
September, 2006. The lien of answering defendant was
also marked with DLF.

st
ii) That vide letter dated 1 September, 2007, the
Defendant No.1 & 2 requested the answering defendant
to release the property from lien as they were getting
loan on better interest rates from ICICI Bank which was
acceded to and released the original Flat Buyer
agreement and also got its lien removed from DLF in
favour of ICICI Bank however obtained pari-pasu charge
from the borrower over the DLF property.

th
iii) That on 4 July, 2008 the Defendants No. 1 & 2
sought another loan from the answering defendant. After
conducting due-diligence and after negotiations, the
answering defendant lent Rs 83,00,000/- (Rupees Eighty
Three Lacs Only) to the defendants No. 1 & 2 on
mutually agreed terms and conditions and against the
equitable mortgage of Basement of property No. D-6/2
Vasant Vihar, New Delhi. A separate loan agreement
dated 4.7.08 was executed.

iv) The loan of the Defendants No. 1 & 2 was moving
smoothly and against the DLF property on Rs 47.50 Lacs
approx remained due. The defendant No.1 & 2 came to
CS(OS) No.2277/2010 Page 8 of 51


get top up of the loan. Considering the past
performance, the answering defendants advanced
another sum of 172.25 Lacs thereby made the total loan
amount against DLF property to Rs 2. 20 Crores. A
supplementary loan agreement dated 1.10.08 was also
executed in continuation of original loan agreement
th
dated 26 September, 2006.

v) Thereafter the Defendants No. 1 & 2 became
irregular in their repayments to the loan facility advanced
by the defendant No.6 and finally in February 2010
approached the defendant No.6 disclosing that they are
unable to service the ICICI loan facility and they are
apprehending action by ICICI Bank against the DLF
property for recovery of the loan amount. They disclosed
that dues of DLF are also mounting and DLF is also
threatening to cancel the allotment.

It was further informed that they have already taken loan
upon the Ground Floor of D-6/2 Vasant Vihar Property
from ICICI Bank and due to defaults, ICICI Bank is also
likely to take action against the property for the recovery.
The Defendants No. 1 & 2 again sought help of the
defendant No.6.

vi) On inquiry by the defendant it came to light that the
DLF has already cancelled the allotment of the Pent
House due to non-payment of the installments totaling to
about Rs 80 Lacs. Further the ICICI loan amount
against the DLF property was about Rs 5.85 Crores
which was also heading towards default. Further the
dues payable to the Defendant for the loan taken against
DLF property by the Defendants No. 1 & 2 were also to
the tune of Rs 2.80 Crores.

That it was also confirmed that the loan liability of
ICICI Bank in February 2010 against the Vasant Vihar
property was Rs 5.40 Crores and the dues payable to
the Defendant for the loan taken against Vasant Vihar
CS(OS) No.2277/2010 Page 9 of 51


property by the Defendants No. 1 & 2 were also to the
tune of Rs 1. 33 Crores.

vii) It is contended that considering all the situation and
calculating the odds and risk, the answering defendant
agreed to help Defendants No.1 & 2 and decided to buy
the Ground Floor and Basement of property D-6/2
Vasant Vihar, New Delhi for an agreed total sum of Rs
6.75 Crores. For the purchase of the basement and
Ground floor the answering defendant paid Rs 6.75
Crores in following manner:

i) Rs 2 Lacs cash to the Defendants No. 1 & 2
th
against receipt dated 15 February, 2010.

ii) Rs 1.33 Crores towards repayment of dues of the
answering defendant against the loan agreement
th
dated 4 July, 2008.

iii) Taken over the loan liability of ICICI Bank
against the Ground Floor of the Vasant Vihar
property which was at Rs 5.40 Crores as on
th
15 February, 2010.

th
viii) Second Supplementary Loan agreement dated 24
February,2010 in continuation of loan agreement dated
th
26 September, 2006 and supplementary loan
agreement dated 1.10.08, the defendant paid Rs 80 Lacs
to DLF and revived the allotment of the pent house.
Further cleared the overdue installments of ICICI and
also started paying the dues of ICICI Bank on behalf of
the Defendants No. 1 & 2 to regularize the loan with a
view to protect the property. It was agreed in the Second
th
Supplementary Loan agreement dated 24 February,
2010 that the defendant shall be at liberty to dispose off
st
the property at DLF till 31 May, 2010 and clear the upto
date dues of defendant alongwith interest. Failing which,
the defendant agreed to purchase the DLF property on
mutually agreed price.

CS(OS) No.2277/2010 Page 10 of 51


st
ix) That till 31 May, 2010 the defendant No.6 carried
on paying the dues of ICICI Bank against the DLF
property and also paid dues of DLF. Further to secure
its interest, defendant No. 1 & 2 executed registered
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power of attorney dated 07 April, 2010 in favour of
representative of Defendant No.6.

x) As the defendants No.1 & 2 could not sell the DLF
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property till 31 May 2010 as such finding no way out,
the defendants No.1 & 2 offered to sell their DLF pent
house property to the defendant. Finally, after
negotiations the defendant finally agreed to purchase the
DLF property on negotiated agreed price of Rs. 11,
51,00,000/- (Rupees Eleven Crores Fifty One Lacs
Only). Towards the payment of the sale consideration,
for the purchase of the DLF property the defendant paid
Rs. 11.51 Crores in following manner:-

i) Rs 1 Lac cash to the Defendants No. 1 & 2
th
against receipt dated 15 July 2010.

ii) Rs 5.00 Crores towards repayment of dues of
the answering defendant against the loan
th st
agreements dated 26 September, 2006, 1
th
October, 2008 and 24 February, 2010.

iii) Taken over the loan liability of ICICI Bank against
the Ground Floor of the Vasant Vihar property which
st
was at Rs 5.65 Crores as on 1 June,2010.

iv) Future dues payable to DLF were assessed at
Rs. 85 Lacs.

xi) That for the sale-purchase of property at Vasant
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Vihar, agreement to sell dated 15 February, 2010 and
th
Power of Attorney dated 15 February, 2010 were
executed by defendants No. 1 & 2 in favour of the
defendant No.6. Similarly for the sale-purchase of
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property at DLF agreement to sale dated 1 June 2010
st
and Memorandum of Understanding dated 1 June 2010
CS(OS) No.2277/2010 Page 11 of 51


were executed by defendants No 1 & 2 in favour of the
answering defendant.

After purchasing the two properties, on 23.08.2010,
the defendant fully and finally paid Rs.10, 84,53,097
(Rupees Ten Crores Eighty Four Lacs Fifty Three
Thousand and Ninety-Seven only) to ICICI Bank
obtained NOCs and got the original title deeds of Vasant
Vihar and DLF property released. Further to secure its
entitlement over the property, got its lien marked in
records of DLF, in terms of requirements of DLF,
replacing the name of ICICI.

xii) It is stated in the written statement that although the
answering defendant has purchased the properties and
had paid full and final consideration, but to minimize its
cost, the sale deeds were not executed or got registered.
Rather it was agreed that as and when the defendant
No.6 desires, the Defendants No. 1 & 2 shall execute all
the necessary documents either in favor of the
answering defendant or in favour of its nominee at the
sole discretion of the answering defendant.

Defendant No.6 located a buyer to sell the Ground
floor and Basement of property D-6/2 Vasant Vihar, New
Delhi and after negotiations, the deal was finalized on
th
11 October, 2010 and cheque was received from the
prospective buyer however the formal agreement to sell
for Rs 6. 75 Crores (Rupees Six Crores Seventy Five
st
Lacs) was got executed on 21 October, 2010 by the
defendant, from defendant No.1 & 2 directly in favour of
Mr. K. L. Chugh S/o Mr. R. L. Chugh, R/o N-79,
Panchsheel Park, New Delhi. A representative of the
defendant signed the document as witness and
confirming party of the agreement to sell.

xiii) That subsequently in terms of the agreement to sell
st th
dated 21 October, 2010, Sale Deed dated 7
December, 2010 was also got executed by the defendant
from the defendants No. 1 & 2 directly in favour of Mr K.
CS(OS) No.2277/2010 Page 12 of 51


L. Chugh S/o Mr R. L. Chugh, R/o N-79, Panchsheel
Park, New Delhi regarding basement and ground floor of
property bearing No. D-6/2, Vasant Vihar, New Delhi and
a representative of answering defendant signed the
document as witness and confirming party and all the
payments received were simultaneously credited in the
account of Defendant.

16. It was also mentioned in the written statement that the
defendant No.6 was not at all aware about any loan or second charge
upon the properties at Vasant Vihar or Gurgaon as alleged by the
th
plaintiff. However a letter dated 11 October, 2010 was received by
the said defendant issued by the plaintiff wherein a request was
made by the plaintiff to the said defendant to provide the details of
loan given to defendants No.2 to 3 by the said defendant and also to
record the second charge of plaintiff upon the properties. The letter
th
was duly replied by the defendant No.6 vide letter dated 27 October,
2010 and it was informed to the plaintiff that the two properties have
been purchased by the defendant No.6 against due consideration. In
view thereof, second charge of the plaintiff cannot be recorded
against the two properties.
17. It is also alleged in the written statement that from the
documents filed and relied upon by the plaintiff it is clear that vide
rd
letter dated 23 February, 2010, the defendant No.1 to 3 have
informed that the property Basement and Ground Floor of D-6/2,
Vasant Vihar has already been sold for a sum of Rs 6.75 Crores and
they are already looking for a buyer for Gurgaon property, who also
attached therewith the cheque of Rs 5 Lacs as the surplus from the
sale of Vasant Vihar property after clearing dues of defendant No. 4
CS(OS) No.2277/2010 Page 13 of 51


and 6. Pursuant thereto the plaintiff wrote a letter to defendant No.1
th
to 3 dated 9 March, 2010 with the subject title “permission to sell”.
There was no protest or objection or condition indicated or mentioned
by the plaintiff upon the defendants No.1 to 3 thereby showing their
displeasure/non-permission to the defendants 1 to 3 about sale of the
properties. Rather only information has been sought about the
documentations regarding the sale.
th
18. By letter dated 13 March, 2010 the plaintiff has informed the
defendants No.1 that the value of shares i.e. the security against
which the loan of Rs.5 crores was extended is dropping and
requested the defendant No.1 either to clear the dues otherwise the
shares would be sold. From this letter it is absolutely clear that the
suit properties were never pledged as security nor were they ever put
under second charge with plaintiff and in fact all the documents
regarding second charge upon the two properties and agreement to
sell regarding the Vasant Vihar property are an afterthought and
created ante dated to raise false claim upon the two properties in
connivance with the defendant No.1 to 3 and the plaintiff. It is stated
that the apprehension of the defendant No.6 further got strength from
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the letter dated 15 June, 2010 written by defendant No.5 DLF
whereby it had refused to take cognizance of any back dated letter.
19. It is alleged that the plaintiff was fully aware about all the
transactions but until the entire money is paid and cleared by the
defendant No.6 by investing about Rs.18,26,00,000/- (Rupees
Eighteen Crores and Twenty Six Lacs only) no letter or objection was
raised by plaintiff before any authority or department or even with the
th
defendant No.6. The property at Vasant Vihar was purchased on 15
CS(OS) No.2277/2010 Page 14 of 51


st
February, 2010 and the Gurgaon property was purchased on 1
June, 2010. The plaintiff is now seeking second charge alone without
seeking any recovery from the borrowers. It is a collusive suit
between the plaintiff and defendant No.1 to 3 which has been filed
only to create problems with ulterior motives despite knowing fully
well that no relief regarding recording of second charge can be made
against an individual. As the defendants No. 1 & 2 are no more the
owners of the suit property, the question of recording any charge
upon the property does not arise.
20. After filing the suit, various pending applications have been filed
by the parties, details of which are mentioned in para 1 of my order.
The averments made in these applications and replies filed by the
non-applicants are referred as under:
i) I.A. No.478/2011 (Order 1 Rule 10(2) read with Section 151
CPC)

This application has been filed by the plaintiff for addition of
party i.e. Mr.K.L. Chugh. The main submissions made in the
application are that when the matter came up for hearing, after the
th
summons were served and notices were issued, on 9 December,
2010, the counsel for the defendants No. 1, 2 and 3 gave a statement
that they have sold the property to defendant No. 6. The counsel for
defendant No.6 stated that the Vasant Vihar property has been sold
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by them on 7 December 2010 to one Mr. Chugh. On the Court’s
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direction, the counsel for the defendant No.6 vide email dated 21
December, 2010, conveyed to the counsel of the plaintiff the details
of the buyer and the sale executed by defendant No.6 in favour of the
buyer, Mr. Chugh. The details are as under:
CS(OS) No.2277/2010 Page 15 of 51


Name of the purchaser : K L Chugh
Address : N- 79, Panchsheel Park, New Delhi-
110017
Date of Registry : 07/12/2010
Sale Consideration : Rs.6,75,00,000/- (Rupees Six Crores
Seventy Five Lacs Only)

It is stated in the application that the sale of the property by
defendants No.1, 2 and 3 to defendant No.6 and by defendant No.6
to Mr. Chugh during the pendency of the suit has been objected to by
the plaintiff and it is considered necessary that Mr.Chugh is made a
party in the matter. It has been stated that Mr. Chugh is a necessary
and proper party because the dispute involved in the matter cannot
be finally adjudicated in his absence.
In his reply to the said application, Mr. Chugh stated that he
met defendant Nos. 1 and 2 through a property agent from whom he
bonafidely purchased the property being the Ground Floor and
th
Basement of D-6/2, Vasant Vihar, New Delhi on 7 December, 2010
for a consideration of Rs.6.75 Crores pursuant to an Agreement to
st
Sell dated 21 October 2010 and he is in the possession of the same.
It has been stated that the defendants No.1 and 2 had stated
that they had cleared title without any encumbrance, charge or lien. In
fact the original title deeds were in possession of defendants No.1
and 2, which were shown to him at the time of entering into the
agreement to sell. He purchased the property from defendants No.1
and 2 and not from any other party as claimed by the plaintiff in his
application.
CS(OS) No.2277/2010 Page 16 of 51


It has been stated that as claimed by the plaintiff, had the
property been mortgaged to the plaintiff, the original title deeds of the
same ought to have been in the plaintiff’s possession. The property
has been bought by him in good faith and for consideration after due
diligence.
ii) I.A. No. 6654/2011 (u/O 1 R. 10 r/w S.151 CPC)
The above application has been filed by defendants No.1 to 3
for deletion of names of defendants No.4 to 6 as being neither proper
nor necessary parties to the suit. It has been stated that various loan
agreements have been executed between the plaintiff and
defendants No. 1 to 3, however, defendants No. 4 to 6 are not parties
to the said agreements and have no privity of contract with the
plaintiff. They are referred to as proforma parties in the plaint itself.
Defendants No. 4 to 6 have wrongly and falsely been made parties
only with a view to put undue pressure upon defendants No.1 to 3.
Therefore, the names of defendants No. 4 to 6 be deleted from the
array of parties as being neither proper nor necessary parties for
proper adjudication of the disputes.
In the reply to the said application, the plaintiff stated that the
presence of defendants No.4 to 6 has become necessary and now
the plaintiff is seeking reliefs against the defendants No.4 to 6 also, in
view of subsequent facts brought on record.
iii) I.A. No. 6657/2011 (u/S. 8 of Arbitration and Conciliation
Act, 1996)

The above mentioned application is also filed by defendants
No.1 to 3 for reference of the disputes in the present suit to
arbitration. It is stated that various loan agreements were executed
CS(OS) No.2277/2010 Page 17 of 51


by the plaintiff and defendants No. 1, 2 and 3, wherein there is a
clause providing for arbitration. Since the present suit is seeking
enforcement of an obligation as enumerated in the loan agreement
which clearly and specifically provides for arbitration in case of any
dispute arising out of the agreement, the present suit be dismissed
and the parties be relegated to arbitration in terms of contractual
provisions.
In the reply to the said application, the plaintiff stated that the
arbitration agreement is between the plaintiff and defendant No.3.
However, the subject-matter of the present suit cannot be referred to
arbitration because the parties are different and the reliefs are being
sought against third parties who are not parties to the Arbitration
Agreement.
iv) I.A. No. 20809/2011 (u/O 7 R. 11 r/w S.151 CPC)
Yet another application filed by defendants No.1 to 3 for
rejection of the present suit. It is stated by the defendants No.1 to 3
that since the document relied upon by the plaintiff (loan agreement
th
dated 27 February, 2009) for claiming second charge on the
immovable properties is unregistered and the same is inadmissible in
evidence. The suit by the plaintiff based on the unregistered
document involving interests in immovable property is barred by law
and is therefore liable to be rejected. It is stated that if the suit is for
the alleged cause of action of non-payment of dues, then the remedy
for the same is a suit for recovery, which the plaintiff has not claimed.
The plaintiff is rather seeking to enforce recovery by means of
injunction. Such a cause of action is not permissible under the law. It
is also stated that for recovery of dues, the plaintiff is required to pay
CS(OS) No.2277/2010 Page 18 of 51


ad valorem court fee. The plaintiff is seeking to avoid the payment of
court fee by not filing a suit for recovery.
In reply filed by the plaintiff to the said application, the
contentions of the defendants have been denied.
v) I.A. No. 274/2012 (Order 6 Rule 17 r/w S.151 CPC)
This is an application filed by the plaintiff for amendment of the
plaint to bring on record the subsequent developments in the matter.
It is the case of the plaintiff that certain cause of action arose
post issuance of summons in the matter and certain information has
not been provided by the defendants despite direction by this Court.
Defendants’ attempts were not to give full information to the plaintiff,
and suppressing complete information in the process delaying entire
progress and trial of the suit.
In view of the subsequent developments, the plaintiff has filed
the instant application to amend the plaint in terms of para 17 of the
application.
In the reply to the said application, the defendants No. 1 to 3
have stated that the proposed amendments are not legally
maintainable and sustainable in the eyes of law. If the proposed
amendments are allowed, it will change the whole character and
nature of the existing suit which is for “permanent injunction” into a
suit for “specific performance and/or recovery” and thus
constitutionally and fundamentally changing the nature and character
of the suit”.
It is stated that plaintiff has filed the application only after the
defendants filed an application under Order 7 Rule 11 CPC seeking
rejection of the plaint on various grounds. It is only an attempt to
CS(OS) No.2277/2010 Page 19 of 51


overcome the objection raised by the defendants and to take away
the legal rights of the defendants.
In the reply filed by defendant No.6, it has been stated that in
case the plaintiff is permitted to amend his suit, it would change the
entire colour of the suit. The plaintiff is trying to introduce a new case
which was not his case in the original plaint by converting his suit of
injunction into a suit for declaration and specific performance and
also for a recovery.
The other two applications have been filed by the plaintiff, one
I.A. No.15012/2010, under Order II Rule 2 CPC, the details of which
are already mentioned and second I.A. No.15011/2010 filed along
with plaint is for stay, wherein an ex-parte order was not passed,
however, after service of the defendants, status quo order was
th
passed on 9 December, 2010.
As some of the facts in the main suit and pending applications
are common, the same are being considered together.
21. Mr.C.Mukund, the learned counsel appearing on behalf of
plaintiff, has made various submissions which are outlined as under:
a) That the correct position is that when the suit and interim
th
application were first time listed before court on 10
November, 2010, the summons and notice were issued for
th
16 November, 2010. But the same were not issued and
defendants could not be served, however, the complete sets
of paper-book were privately sent to all the defendants by
speed posts which were served. An affidavit of service was
th
filed on 12 November, 2010.
CS(OS) No.2277/2010 Page 20 of 51


th
b) That the matter was listed on 16 November, 2010 and the
th
Court issued notice and fixed 9 December, 2010 for
hearing. The plaintiff collected the notices from the Court,
the Registry and caused the same to be served upon the
th
defendants. The plaintiff filed an affidavit of service dated 6
December, 2010 by giving details of service. According to
the plaintiffs, prior to execution and registration of sale deed
th
dated 7 December, 2010 by the defendants No.1 and 2 in
favour of Mr.K.L. Chugh, all the defendants were duly served
with the notices issued by this Court and inspite of knowing
about the plaintiff case and pendency of suit, the defendants
No.1, 2, 3 and 6 caused the sale deed to be executed and
registered in favour of Sh.K.L. Chugh, of property bearing
No.7, Panchsheel Park, New Delhi-110017.
c) That even before filing of the suit, the plaintiff caused paper
publications to be published in the newspaper both in
English and Hindi version of Hindustan Times, English and
Hindustan in Hindi informing the general public at large that
the said two properties are mortgaged properties in favour of
the plaintiff and in view of the default committed by the
defendants No.1, 2 and 4, not to deal with or purchase, or
enter into any arrangement in respect of the said properties
in any manner. The copies of the paper publications have
been filed along with the list of documents. Mr.Chugh has
purchased the property, which is the subject matter, from
defendants No.1 and 2 as he has admitted in his criminal
complaint filed by him. The defendant No.6 was never the
CS(OS) No.2277/2010 Page 21 of 51


owner of the property. All the papers allegedly filed by the
defendant No.6 in support of its submissions are not genuine
and cannot be relied upon. The stand taken by the
defendant No.6 is contrary to the statement made by
Mr.Chugh.
d) That the new purchaser of the property namely K.L. Chugh
is therefore a necessary and proper in the present
proceedings. The plaintiff states that presence of Mr.K.L.
Chugh, the new purchaser of the suit property before this
Court is necessary in order to enable this Court to effectively
and completely adjudicate upon and settle all the questions
involved in the suit and to avoid multiplicity of judicial
proceedings, confliction of judicial decisions and to save
costs of parties. As such the plaintiffs have filed this
application for addition of Mr.K.L. Chugh as one of the
defendants in the suit.
e) That the Vasant Vihar property has been sold by defendant
No.1 to 3, 4 and 6 in connivance with each other to Mr.K.L.
Chugh, who is a necessary party. All the defendants and
Mr. Chugh were aware about the pendency of suit on the
th
date of execution of sale deed i.e. 7 December, 2010. It
was done deliberately two days prior to the next date fixed
th
by the court on 9 December, 2010 in order to frustrate the
rights and claims of the plaintiff and in normal case, the said
transaction ought not to have been done when the suit is
pending and the defendants were aware about it.
CS(OS) No.2277/2010 Page 22 of 51


f) That it is necessary that Mr.K.L. Chugh be impleaded as
defendant No.7 and the plaintiff application under Order 6
Rule 17 CPC for amendment of plaint and relief be allowed
in view of subsequent events. It is argued by Mr.Mukund
that the plaintiff in the matter has already filed an application
under Order II Rule 2 CPC along with plaint being IA
th
No.15012/10 in which the notice was issued on 10
November, 2010 reserving liberty to seek other relief
including the relief of specific performance. As Mr.K.L.
Chugh is the subsequent purchaser of the property by sale
th
deed dated 7 December, 2010 therefore the application
under Order 6 Rule 17 CPC is liable to be allowed. The
plaintiff is merely bringing the additional fact and events and
prayers are to be added in view of change of circumstances.
22. The following decisions are referred by Mr.Mukund in support of
his submissions:
Under Order 1 Rule 10 CPC
i. Amit Kumar Shaw and another vs. Farida Khatoon and
another , AIR 2005 SC 2209.

ii. Razia Begum vs. Sahebzadi Anwar Begum and others , AIR
1958 SC 886.

iii. M/s Aliji Monoji & Co. vs. Lalji Mavji and others , AIR 1997
SC 64.

iv. Savitri Devi vs. District Judge, Gorakhpur and Others,
(1999) 2 SCC 577.

v. Khemchand Shankar Choudhary and another vs. Vishnu
Hari Patil and others, AIR 1983 SC 124.
CS(OS) No.2277/2010 Page 23 of 51


Under Order VII Rule 11 CPC
i. M/s. Texem Engineering vs. M/s. Texcomash Export , ILR
(2011) IV Delhi 176.

ii. D. Ramachandran vs. R.V. Janakiraman and others, AIR
1999 SC 1128.

Under Section 8 of the Arbitration and Conciliation Act
i. Booz Allen and Hamilton Inc. vs. SBI Home Finance
Limited and Others, (2011) 5 SCC 532 (Paras 48.3, 51 & 52).

Under Order II Rule 2 CPC
i. Virgo Industries (Eng.) Private Limited vs. Venturetech
Solutions Private Limited, (2013) 1 SCC 625 (Para 8).

Under Section 52 of the Transfer of Property Act
i. Thomson Press (India) Limited vs. Nanak Builders and
Investors Private Limited and Others, (2013) 5 SCC 397
(Paras 16, 26, 30 & 45).

ii. Guruswamy Nadar vs. P. Lakshmi Ammal (dead) Through
LRs and Others, (2008) 5 SCC 796 (Paras 6, 7, 8, 9 & 13).

iii. Jayaram Mudaliar vs. Ayyaswami and Others, (1972) 2 SCC
200 (Paras 13, 14, 43 & 44).

23. Mr.Sandeep Sethi, learned Senior counsel appearing on behalf
of the defendants No.1 to 3, Mr.Maninder Singh, learned Senior
counsel appearing on behalf of the defendant No.6 and Mr.T.K.
Ganju, learned Senior counsel appearing on behalf of the proposed
defendant No.7, have made their submissions at great length and
their main argument is that when the suit itself is not maintainable,
CS(OS) No.2277/2010 Page 24 of 51


the question of considering the prayer made in the applications for
amendment and impleadment does not arise.
It is common argument of all the defendants that there is no
cause of action for the plaintiff to file the present suit which is not
maintainable and if the suit itself is not maintainable, the amendment
in the plaint and prayer for impleadment of additional party is not
called for. As far as proposition of law, as laid down in the judgments
referred by the plaintiff, is concerned, they are not disputing the
same. They submit that in an appropriate case such relief(s) can be
granted. But in the present case, the plaintiff is not entitled for relief
claimed in the suit. The said decisions do not help the case of the
plaintiff.
24. From the record and original documents filed by the defendant
No.1, it is evident that Mr.Chugh had purchased the property after
availing a loan from Standard Chartered Bank. The said bank had
also carried out due diligence for the said property. It would be
st
apparent from above that the Agreement to Sell dated 21 October,
2010 was prior to the suit filed by the plaintiff. Mr.Chugh had paid the
sale consideration to defendant Nos.1 and 2 as recorded in the sale
deed in the following manner :

CS(OS) No.2277/2010 Page 25 of 51

The original title deeds of the said property were with defendant
Nos.1 and 2 who handed over the same to Mr. Chugh. The said title
deeds are now lying with Standard Chartered Bank against the loan
granted to Mr. Chugh. It shows that at no point of time during the
purchase of the said property Mr.Chugh had any knowledge about
the present suit and/or any of the transactions alleged in the suit
between the plaintiff and defendants No.1 and 2. The suit was filed
nd
on 2 November, 2010 which was listed before Court first time on
th
10 November, 2010. Before filing of suit, Mr.Chugh already initiated
various steps to get the loan sanctioned. Mr. Chugh apparently came
to know about the filing of the suit and litigation between the parties at
the later stage. According to him, he came to know about the same
when the copy of application, being I.A. No.478/2011 under Order 1
Rule 10 CPC, was served. As soon as he got to know about the
present suit and alleged transactions between defendant Nos.1 and 2
Mr. Chug filed a complaint with the Economic Offences Wing, Crime
th
Branch, New Delhi on 6 April, 2011 against defendants No.1 and 2
who had concealed the loan transactions and other documents
executed by them with the plaintiff from Mr. Chugh.
25. In the plaint, the plaintiff sought the reliefs restraining the
defendants No.1 and 2 from selling, transferring and creating third
party interest of the suit properties and for declaration that the
defendants No.4 to 6 are second charge of the plaintiff and
CS(OS) No.2277/2010 Page 26 of 51


mandatory injunction against them. It has come on record that before
th
filing of suit in view of the deal finalized on 11 October, 2010 the
st
agreement to sell dated 21 October, 2010 was already executed
with regard to the property of ground floor and basement of D-6/2,
Vasant Vihar, New Delhi. The cheque was received from Mr.Chugh,
prospective buyer.
26. In the light of above mentioned facts and circumstances, it is to
be considered by this Court as to whether the suit filed by the plaintiff
is maintainable against the defendants No.4 to 6 or the plaintiff has
now any cause of action against them and whether the plaintiff is
entitled to relief of impleadment of Mr.Chugh and consequently
amendment of plaint.
27. The present suit is in the nature of suit for declaration/injunction
wherein plaintiff has prayed for a decree for declaration that the
properties No.D-6/2, Vasant Vihar, New Delhi and Pent House
No.1923-A, DLF Magnolia, Gurgaon are under the second charge of
the plaintiff. The plaintiff’s claim of second charge over the properties
th
is based on the loan agreement dated 27 February, 2009 who is
th
also seeking enforcement of purported agreement to sell dated 27
February, 2009.
28. It is not denied by the plaintiff that the document relied upon by
th
the plaintiff (loan agreement dated 27 February, 2009) for claiming
second charge on the immovable properties is unregistered
document. The suit is admittedly filed on the basis of unregistered
document involving interest in immovable property.
29. A charge can be created under Section 100 of the Transfer of
Property Act, 1882 and all the provisions which apply to simple
CS(OS) No.2277/2010 Page 27 of 51


mortgage shall also apply to the creation of any charge. A simple
mortgage is defined under Section 58 (B) of the Transfer of Property
Act, 1882 wherein without delivering possession of the mortgage
property, the mortgagor binds himself personally to pay the mortgage
money and in the event of this default the mortgage property can be
sold. Under Section 59 of the Transfer of Property Act, 1882 every
mortgage other than the mortgage by deposit of title deeds (i.e.
equitable mortgage) can be affected only by a registered instrument
signed by the Mortgagor and attested by the two witnesses. It is
admitted in the present case, that the charge has not been registered.
Under Section 17(B) of the Registration Act, registration of charge is
compulsory and in absence of registration, the charge cannot be
enforced. Reliance in this regard can be placed on the case of M.L.
Abdul Jabbar Sahib vs. H. Venkata Sastri and Sons & Ors. , AIR
1969 SC 1147, and relevant paras 12 and 15 of the same are
reproduced as under:
“12. As to the second question, the argument on behalf of
the respondents is that Section 100 of the Transfer of
Property Act attracts Section 59 and that a charge can be
created only by a document signed, registered and
attested, by two witnesses in accordance with Section 59
where the principal money secured is Rs. 100 or upwards.
The High Court accepted this contention following its
earlier decisions in Viswanadhem v. Menon and Shiva
Rao v. Shanmugasunderaswami and held that the
security bond was invalid, as it was attested by one
witness only. We are unable to agree with this opinion.
Section 100 is in these terms:

"Where immoveable property of one person is by
act of parties or operation of law made security for
the payment of money to another, and the
CS(OS) No.2277/2010 Page 28 of 51


transaction does not amount to a mortgage, the
latter person is said to have a charge on the
property; and all the provision hereinbefore
contained which apply to a simple mortgage shall,
so far as may be, apply to such charge.

Nothing in this section applies to the charge of a
trustee on the trust property for expenses properly
incurred in the execution of his trust, and, save as
otherwise expressly provided by any law for the time
being in force, no charge shall be enforced against
any property in the hands of a person to whom such
property has been transferred for consideration and
without notice of the charge.

15. If a charge can be made by a registered instrument
only in accordance with Section 59, the subsequent
transferee will always have notice of the charge in view of
Section 3 under which registration of the instrument
operates as such a notice. But the basic assumption of
the doctrine of notice enunciated in the second paragraph
is that there may be cases where the subsequent
transferee may not have notice of the charge. The plain
implication of this paragraph is that a charge can be made
without any writing.”

30. The said document purporting to create a charge would also
require to be executed on a stamp paper of requisite value under the
provisions of Stamp Act which has not been done. A document,
which is not adequately stamped in accordance with law, cannot be
looked into for any purpose whatsoever. In the case of Suraj Lamp &
Industries Pvt. Ltd. v. State of Haryana & Anr. , (2012) 1 SCC 656,
th
(SLP (C) No.13917/2009, dated 11 October, 2011), it was observed:
“15. In the earlier order dated 15.5.2009, the objects and
benefits of registration were explained and we extract
them for ready reference :
CS(OS) No.2277/2010 Page 29 of 51


"15. The Registration Act, 1908, was enacted with
the intention of providing orderliness, discipline and
public notice in regard to transactions relating to
immovable property and protection from fraud and
forgery of documents of transfer. This is achieved
by requiring compulsory registration of certain types
of documents and providing for consequences of
non-registration.
16. Section 17 of the Registration Act clearly
provides that any document (other than
testamentary instruments) which purports or
operates to create, declare, assign, limit or
extinguish whether in present or in future ‘any right,
title or interest’ whether vested or contingent of the
value of Rs.100 and upwards to or in immovable
property.
17. Section 49 of the said Act provides that no
document required by Section 17 to be registered
shall, affect any immovable property comprised
therein or received as evidence of any transaction
affected such property, unless it has been
registered. Registration of a document gives notice
to the world that such a document has been
executed.
18. Registration provides safety and security to
transactions relating to immovable property, even if
the document is lost or destroyed. It gives publicity
and public exposure to documents thereby
preventing forgeries and frauds in regard to
transactions and execution of documents.
Registration provides information to people who
may deal with a property, as to the nature and
extent of the rights which persons may have,
affecting that property. In other words, it enables
people to find out whether any particular property
with which they are concerned, has been subjected
CS(OS) No.2277/2010 Page 30 of 51


to any legal obligation or liability and who is or are
the person(s) presently having right, title, and
interest in the property. It gives solemnity of form
and perpetuate documents which are of legal
importance or relevance by recording them, where
people may see the record and enquire and
ascertain what the particulars are and as far as land
is concerned what obligations exist with regard to
them. It ensures that every person dealing with
immovable property can rely with confidence upon
the statements contained in the registers
(maintained under the said Act) as a full and
complete account of all transactions by which the
title to the property may be affected and secure
extracts/copies duly certified."
Registration of documents makes the process of
verification and certification of title easier and
simpler. It reduces disputes and litigations to a large
extent.”
31. It is apparent in the present case that the defendant No.6
st
purchased the Gurgaon property on 1 June, 2010. Mr.Chugh has
th
purchased the Vasant Vihar property on 7 December, 2010. There
was no interim order on that date. From the correspondences
available on record, which is not denied by the plaintiff, it is clear that
the plaintiff was aware about the said transaction. The plaintiff while
drafting the plaint has vaguely made its statement in this respect and
is trying to take the shelter of the application filed by the plaintiff
under Order II Rule 2 CPC. It is settled law that by application of the
second part of Section 100 of the Transfer of Property Act a charge is
not enforceable against a bonafide transferee of the property for
value without notice of the charge. In the present case, no steps
were taken by the plaintiff to recover the loan amount from
CS(OS) No.2277/2010 Page 31 of 51


defendants No.1 to 3. The suit is merely filed for declaration. No
proposed amendment in the plaint is for alternative prayer for
recovery from the defendants No.1 to 3.
32. As regard the relief sought by the plaintiff for enforcement of
th
purported agreement to sell dated 27 February, 2009, Clauses 3
and 4 of the said agreement provide as under:
“3. That since the said property is carrying housing
loan(s) from ICICI Bank Ltd./ICICI Home Finance, the
second party shall settle the outstanding dues of ICICI
Bank Limited/ICICI Home Finance before enforcing the
Agreement. The First Party will however pay the EMIs
due on the home loan against the aforesaid property
during the period upto 30.06.2009.
4. In the event the First Party is able to get a better price
than the consideration agreed between them in this
agreement. The First Party would be duly authorized for
contracting and selling the aforesaid property without
recourse to the Second Party but under an information to
the Second Party in respect of contracting a deal of
aforesaid sale consideration. In this case the first party
undertakes to settle the ICICI Bank Limited/ICICI Home
Finance loans out of the sale proceeds and remit the
balance to the second party towards part payment
against the ICD.”
33. It is argued by Mr. T.K. Ganju, learned Senior counsel
appearing on behalf of proposed defendant No.7 that the said relief is
neither maintainable nor available to the plaintiff. The suit property in
question has been sold to Mr. Chugh vide registered Sale Deed
th
dated 7 December, 2010. In fact, an agreement to sell was also
st
executed on 21 October, 2010 before the filing of the suit in
question. Further, in terms of Section 41 (e) and (g) of the Specific
CS(OS) No.2277/2010 Page 32 of 51


Relief Act, 1963 such an injunction cannot be granted. The said
provisions provide as follows :
“41.(e) An injunction cannot be granted to prevent the
breach of a contract the performance of which would not be
specifically enforced.
41(g). An injunction cannot be granted to prevent the
continuing breach in which the plaintiff has acquiesced.”
th
It is submitted that the said agreement to sell dated 7
December, 2010 is not enforceable. Even assuming such agreement
to sell was enforceable, the plaintiff has acquiesced in its breach by
impliedly consenting for sale of property to third party, intimation of
which was conveyed to it by defendant Nos.1 and 2 through their
th
letter dated 24 February, 2010. If the suit filed by the plaintiff is not
maintainable, the same would not be maintainable even on the basis
of the amendment application as the specific performance of the
alleged agreement to sell cannot be enforced by the plaintiff in terms
of Clause 3 of the aforesaid agreement as it is not the case of the
plaintiff nor have they pleaded that they have paid, cleared or settled
their dues of ICICI Bank and therefore, the plaintiff has no right to
enforce the agreement to sell. Further, in the alternative in terms of
clause 4 of the agreement to sell, third party rights have been created
with knowledge of the plaintiff and ultimately the suit property has
been sold and conveyed to Mr.Chugh for a valuable consideration.
Mr. Chugh is a bonafide purchaser of the suit property. The
proposed application under Order VI Rule 17 CPC filed by the plaintiff
seeking amendment is hence strongly opposed on the reasons that
the present suit is malafide attempt by the plaintiff to defeat the rights
CS(OS) No.2277/2010 Page 33 of 51


and cloud the title of Mr.Chugh in the said property without any
justification.
34. It is evident from the documents filed by the plaintiff that the
th
plaintiff was fully aware of the fact that with effect from 24 February,
2010, when an intimation was sent to him by defendants No.1 & 2
regarding the sale of the suit property for the price of Rs.6.75 crores,
the plaintiff never objected to the said sale. The said sale was,
therefore, with the knowledge and implied consent of the plaintiff.
The plaintiff as a reasonable and prudent person ought to know that
several third party rights would have been created over the suit
th
property. Thus, being aware of the fact that as early on 24
February, 2010, third party rights over the suit property have been
created, the present application for amendment was filed in January,
th
2012 seeking specific performance of its agreement to sell dated 27
February, 2009 and further reliefs for cancellation of the sale deed in
favour of Mr.Chugh.
35. On a perusal of Clause 3, it is clear that right of plaintiff to
enforce the Agreement to Sell would arise only if the plaintiff settles
the outstanding dues of ICICI Bank. The dues of ICICI Bank
admittedly were about Rs.5.40 crores against the said property at
Vasant Vihar. The plaintiff under Clause 3 of the said Agreement
cannot seek enforcement of the said Agreement unless and until the
outstanding dues of ICICI Bank are first paid, cleared or settled,
which were approximately Rs.5.40 crores in February, 2010. The
plaintiff has not settled and/or paid the said dues of ICICI Bank.
Neither there is averment in the plaint nor even in the proposed
amended plaint to this effect.
CS(OS) No.2277/2010 Page 34 of 51


36. Upon intimation about sale of Vasant Vihar (Ground and
th
Basement) property vide defendant’s letter dated 28 February,
2009 plaintiff did not raise any protest about its sale or offered to
enforce the said agreement to sell by offering to pay dues of ICICI
Bank. The intention of the plaintiff was neither to offer to settle dues
of ICICI Bank and enforce the said agreement to sell nor to raise any
protest to the sale being affected by the defendants to Mr.Chugh.
The plaintiff, having chosen not to enforce the agreement to sell when
offered in February, 2009 by not settling the dues of ICICI Bank
cannot now take a U turn and try to enforce the same without having
to fulfill its obligation of settling the account of ICICI Bank which has
been paid by the proposed buyer i.e. defendant No.6. Through this
declaratory suit the plaintiff is trying to assert its limited right without
actually fulfilling its obligations under the agreement. Unless and until
the plaintiff pays the outstanding dues to ICICI Bank, plaintiff could
not have enforced the said agreement to sell. The plaintiff waited for
the dues of ICICI to be paid which were eventually paid by Defendant
No.6 and the Vasant Vihar property became unencumbered then it
filed declaratory suit which clearly lacks cause of action.
37. The plaintiff was fully aware of its limited rights over the
property, (as ICICI Bank was the first charge holder of the suit
property), especially in view of the fact that the major amount of sale
proceeds would go to the first charge holder i.e. ICICI Bank as
rd
explained in the letter of defendant dated 23 February, 2010, the
plaintiff chose not to resist the proposed sale and willing encashed
the two bank drafts submitted by the defendants.
CS(OS) No.2277/2010 Page 35 of 51


th
38. In Clause 4 of the said agreement to sell dated 27 February,
2009, it is provided that if defendants No.1 and 2 get a better price
then the consideration agreed between the plaintiff and the defendant
No.1 (i.e. more than Rs.5.75 crores), the defendant Nos.1 and 2 are
entitled and authorized for contracting and selling the suit property
without recourse to the plaintiff to whom only an intimation is required
to be sent in respect of such a sale. It is admitted case of the plaintiff
rd
that on 23 February, 2010, the defendant Nos.1 to 3 sent a letter
intimating the plaintiff that they have found a buyer for Ground Floor
and Basement of Vasant Vihar property for a net consideration of
Rs.6.75 crores and after paying Rs.5.40 crores to ICICI Bank and
other loans, a sum of Rs.5 lac was remitted to the plaintiff by a
cheque drawn on HDFC Bank. The plaintiff in reply to the said letter,
th
vide their letter dated 9 March, 2010 did not object to the sale and
also encashed the cheque of Rs.5 lac, thereby conveying their
implied acceptance of the sale by the defendants No.1 to 3 of the
said suit property. In terms of Clause 4 of the agreement to sell, only
intimation to the plaintiff was to be given, there was no obligation to
take the consent of the plaintiff. The plaintiff did not raise any
th
objection to the said sale by their letter dated 9 March, 2010. By
th
another letter dated 13 March, 2010 issued by plaintiff to defendant
No.1 still no objection to the sale was raised by plaintiff. The demand
was raised that the value of the securities are below their outstanding
th
amount payable by defendant No.1. Even by letter dated 27
October, 2010, the defendant No.6 had informed the plaintiff having
purchased both properties from the defendants No.1 and 2 against
consideration and refused to record the charge.
CS(OS) No.2277/2010 Page 36 of 51


The correspondences exchanged between the parties are
extracted as under:
“KK/SICPA/2009-2010
Dated February 23, 2010
M/S SICPA (INDIA) LIMITED
308-312, MERCANTILE HOUSE,
15, K. G. MARG,
NEW DELHI-110001.

Kind attn. of Mr. Vij please

Dear Sir,

SUB: Permission for property sale.

th
This has reference to the loan agreement dated 27 February,
2009 executed between SICPA India Ltd and Brushman (India)
Limited, wherein apart from other securities, second charge on
properties located at D-6/2 Ground Floor, Vasant Vihar, New
Delhi-110057 and penthouse No. 1917-A, DLF Magnolias,
Gurgaon both in the name of Kapil Kumar s/o late sh Kanwal
Krishan and Rittu Kumar w/o Kapil Kumar were offered as per the
loan agreement. Relevant documents were submitted to you as
mentioned in the loan agreement.

We wish to inform you that there is a demand notice raised by
DLF on the Penthouse No. 1923A of appx. Rs. 98 Lacs and the
allotment is liable to be cancelled in case this amount is not paid
within a reasonable time. Further, there is a pressure from ICICI
housing loan department to clear off the loans on both the
properties, failing which they have threatened to initiate action as
per law. We are therefore, under pressure to sell off both the
properties and clear the bank loans.

We have found a buyer for Vasant Vihar property and have taken
a token advance against the same, for a total Net consideration of
Rs 675 Lacs (ground pus basement combined). Out of this, a sum
of Rs 540 Las (appx) has to be paid to ICICI Bank various loans
running against the Vasant Vihar property while Rs 133 Lacs has
to be paid to M/s Genesis Finance Co. Ltd. Towards the loan
running against the basement. This leaves a sum of Rs 2.00 Lacs
(appx) balance with us to be repaid to you. However, as a
goodwill gesture, we are remitting you a sum of Rs 5 Lacs
th
(payable vide D/D No. 020507 dated 15 February, 2010 for Rs 2
th
Lacs and No. 020508 dated 15 February, 2010 for Rs 3.00 Lacs,
CS(OS) No.2277/2010 Page 37 of 51


both drawn in your favour on HDFC Bank). You are aware of the
financial crunch at our end and we are sure that this gesture of
remitting you more amount than what is left out of sale proceeds
shall not go unappreciated by you. In light of the above, you are
requested to kindly accord your permission to sell the Vasant
Vihar property and also confirm that the Agreement to sell entered
with you against the same and the Power of attorney/Will
submitted against the same is treated as cancelled.

It is not out of place to inform you that talks with prospective
buyers for Magnolia property are also underway and we hope to
finalise the same within next two/three weeks.

We also take this opportunity to inform you that the bank
restructuring is still in progress. Bankers had appointed a stock
auditor to conduct stock valuation, as a prerequisite to the
restructuring process. The process of physical stock taking at
major locations has been completed and the required information
has been passed on to the stock auditors subsequently. We
expect the stock audit report to be finalized/submitted to bankers
by first/second week of March, 2010. Subsequently, the bank
shall proceed further in the matter. Photocopy of letters received
from stock auditors are enclosed for your reference.

As regards the GDR issue, we had already submitted our
application for in-principle approval to various stock exchanges in
December 2009 itself. Certain queries are raised by the stock
exchanges and the necessary documentation is underway. The
offering circular (prospectus) is more or less complete. We need
to appoint the legal councel for the issue (in India & abroad) and
after receiving the in-principle approval from the stock exchanges,
we shall be in a position to open the issue.

We trust you shall find yourself updated on various issues and
request you to kindly grant us permission/confirmations as
requested by us with regards to Vasant Vihar property
immediately.

Regards
For BRUSHMAN (INDIA) LIMITED

KAPIL KUMAR
MANAGING DIRECTOR
Enc: As above”

________________________________
CS(OS) No.2277/2010 Page 38 of 51



“SIL/BIL/SS/2010/001
March 09, 2010

Mr. Kapil Kumar,
Managing Director,
Brushman (India) Limited,
B-95/3, Phase-1, Naraina Industrial Area,
New Delhi-110028.

Sub : Permission for property sale.

Dear Sir,

This has reference to your letter no. KK/SICPA/2009-10 dated
23.02.2010 as personally delivery by you in our office on
04.03.2010 on the abovesaid subject.

For consideration of your request, please provide us attested copy
of the following documents:

1. Conveyance Deed/Agreement to sell for Vasant Vihar Property.
2. Request letter written to ICICI Bank and Genesis Finance Co. Ltd
for settlement of the loan, including pre-payment etc and their
response.

Thanking you,

For SICPA India Ltd.

Sujoy Sengupta
Dy. General Manager (F & A)”

________________________________

“SIL/BIL/SS/2010
April 06, 2010

Mr. Kapil Kumar,
Managing Director,
Brushman (India) Limited,
B-95/3, Phase-1,
Naraina Industrial Area,
New Delhi-110028.

Sub : Permission for property sale.
CS(OS) No.2277/2010 Page 39 of 51


Dear Sir,

This is further to our letter no. SIL/BIL/SS/2010/001 dated March
09, 2010 sent through Registered AD.

We are yet to receive the attested copies of the following
documents which were requested in our aforesaid letter.
1. Conveyance Deed/Agreement to Sell for Vasant Vihar property.
2. Request letter written to ICICI Bank and Genesis Finance Co. Ltd
for settlement of the loan, including pre-payment etc. and their
response.
Would appreciate if the above said documents are expedited.

Thanking you,
For SICPA India Ltd.

Sujoy Sengupta
Dy. General Manager (F & A)

CC : Mrs. Ritu Kumar
w/o Mr. Kapil Kumar
61/18, Ramjas Road,
New Delhi-110005.”
________________________________

th
“27 October, 2010

To,
Sh. Sujoy Sengupta
Dy. General Manager (F & A)
SICPA India Private Limited
308-312, Mercantile House,
15, Kasturba Gandhi Marg,
New Delhi-110001.

Reference: Letter dated 11.10.2010 bearing No.
SIPL/GFCL/SS/2010

Subject: Reply to the refereed letter.

Sir,

We wish to inform you that we have purchased the DLF
Magnolias property and Vasant Vihar property from the borrowers
against due consideration as such there is no possibility of
recording your second charge.
CS(OS) No.2277/2010 Page 40 of 51


Thanking you.

Yours truly,

For M/s Genesis Finance Company Limited.

(Vinod Tayal)
Vice-President.”

39. As per the agreement to sell, there was no permission required
from the plaintiff for the defendants to sell the Vasant Vihar property
so long as they got better price than the agreed price. There was no
objection from the plaintiff even after the defendants had kept the
rd
plaintiff informed vide letter dated 23 February, 2010. The plaintiff
without demur encashed the demand drafts given by the defendants.
40. The suit was filed initially for permanent injunction and for
mandatory injunction, declaration and regarding registration of the
charge of the plaintiff with respect to the suit property in the records
of defendants No.4 to 6. Thus, the suit was with respect to reliefs
sought to be claimed by the plaintiff under the Loan Agreement dated
th
27 February, 2009 under which, the plaintiff claimed a charge over
the suit property. The proposed amendments now seek to change
the nature and character over the suit by claiming declaration and
cancellation of the sale deed in favour of Mr.Chugh, possession of
the property from Mr.Chugh, decree for specific performance of the
th
agreement dated 27 February, 2009 and in alternative decree for
recovery of an amount of Rs.8,50,36,918/-. The fact that the said
reliefs would alter the nature and character of the suit cannot be
denied.
CS(OS) No.2277/2010 Page 41 of 51


41. It is necessary to refer the prayer made in the proposed
amended plaint filed along with the application under Order 6 Rule
17, being IA 274/2014. The prayer is as under:
“a) Leave be granted under Order 2 Rule 2 of CPC;
b) Decree for permanent injunction restraining the
defendant Nos.1 & 2 and their men, agents and
associates from selling, transferring, conveying and/or
creating third party interest or creating any interest of any
nature whatsoever in respect of the (a) Land and property
at D-6/2, Vasant Vihar, New Delhi and (b) Property at
Penthouse No.1917-A (New No.1923-A), DLF, Magnolias,
Gurgaon and/or in respect of any rights relating to the said
properties;
c) Decree for Declaration that the properties No.(a) D-6/2,
Vasant Vihar, New Delhi and (b) Pent House No.1917-A
(New No.1923-A), DLF, Magnolias, Gurgaon are under
the Second charge of the plaintiff and Defendant Nos.4, 5
& 6 are bound to take note of the fact and to keep the
records in their Books that both the aforesaid properties
are under Second Charge of the Plaintiff;
d) Mandatory Injunction directing the Defendant Nos.4, 5
& 6 to record in their Books of Accounts the name of the
Plaintiff as Second Charge Holder, the first charge thereof
was with the Defendant No.4.
(e) Decree for Declaration that the Sale Deed dated
07.12.2010 as also the agreement to sale dated
21.10.2010 by the defendant Nos.1 and 2 selling the
property situated at D-6/2, Vasant Vihar, New Delhi in
favour of the defendant No.7 Mr.K.L. Chugh is bad, illegal,
void and unenforceable in law as a consequent whereof
cancel the Sale Deed;
(f) Decree for specific performance of agreement for sale
dated 27.02.2009 in favour of the plaintiff inter alia
directing the defendant Nos.1 & 2 to execute and register
CS(OS) No.2277/2010 Page 42 of 51


Sale Deed in respect of ground floor of land and property
No. D-6/2, Vasant Vihar, New Delhi.
(g) Decree for mandatory injunction directing the
defendant Nos.1 to 3 and 7 to quit, vacate and deliver the
vacant possession of the ground floor of premises No. D-
6/2, Vasant Vihar, New Delhi to the plaintiff.
(h) Declare that transfer and/or creation of any rights in
favour of defendant No.6, in respect of Pent House
No.1917-A (New No.1923-A), DLF, Magnolias, Gurgaon
without first satisfying the claim of the plaintiff is bad,
illegal, void ab initio and has no force in law.
Alternatively,
(i) Pass a Decree for the sum of Rs.8,50,36,918/-
(Rupees Eight Crore Fifty Lacs Thirty Six Thousand Nine
Hundred Eighteen only) in favour of the plaintiff and
against the defendant Nos.1, 2 and 3 in respect of the
amount paid by the plaintiff to the defendant Nos.1 to 3
together with further interest @ 24% p.a. and damages &
Cost.”
42. The decision in the case of Revajeetu Builders and
Developers vs. Narayanaswamy and Sons and Ors. , (2009) 10
SCC 84 is referred in this regard. Relevant paras 58 and 63 to 65
read as under:-
“58. In B.K. Narayana Pillai v. Parameshwaram Pillai
and Anr. (2000) 1 SCC 712, a suit was filed by A for
recovery of possession from B alleging that B was a
licensee. In the written statement B contended that he was
a lessee. After the trial began, he applied for amendment of
the written statement by adding an alternative plea that in
case B is held to be a licensee, the licence was
irrevocable. The amendment was refused.
CS(OS) No.2277/2010 Page 43 of 51


63. The Courts have very wide discretion in the matter of
amendment of pleadings but court's powers must be
exercised judiciously and with great care.
64. In Ganga Bai's case (supra), this Court has rightly
observed:
The power to allow an amendment is undoubtedly wide
and may at any stage be appropriately exercised in the
interest of justice, the law of limitation notwithstanding. But
the exercise of such far-reaching discretionary powers is
governed by judicial considerations and wider the
discretion, greater ought to be the care and circumspection
on the part of the court.
COSTS:
65. The Courts have consistently laid down that for
unnecessary delay and inconvenience, the opposite party
must be compensated with costs. The imposition of costs is
an important judicial exercise particularly when the courts
deal with the cases of amendment. The costs cannot and
should not be imposed arbitrarily. In our view, the following
parameters must be taken into consideration while
imposing the costs. These factors are illustrative in nature
and not exhaustive.
(i) At what stage the amendment was sought?
(ii) While imposing the costs, it should be taken into
consideration whether the amendment has been sought at
a pre-trial or post-trial stage;
(iii)The financial benefit derived by one par- ty at the cost of
other party should be properly calculated in terms of money
and the costs be awarded accordingly.
(iv) The imposition of costs should not be symbolic but
realistic;
CS(OS) No.2277/2010 Page 44 of 51


(v) The delay and inconvenience caused to the opposite
side must be clearly evaluated in terms of additional and
extra court hearings compelling the opposite party to bear
the extra costs.
(vi) In case of appeal to higher courts, the victim of
amendment is compelled to bear considerable additional
costs.
All these aspects must be carefully taken into consideration
while awarding the costs.”
43. In the case of Bharat Karsondas Thakkar v. M/s. Kiran
Construction Co. & Ors. , AIR 2008 SC 2134, it was observed as
under:
“21. Having carefully considered the submissions made
on behalf of the respective parties, and the decisions
cited on their behalf, we are of the view that the Division
Bench of the High Court erred in law in allowing the
amendment of the plaint sought for by the respondent
No.1 herein as the plaintiff in the suit. Even if the bar of
limitation is not taken into account, the plaintiff, namely,
the respondent No.1 herein, is faced with the ominous
question as to whether the amendment of the pleadings
could have at all been allowed by the High Court since it
completely changed the nature and character of the suit
from being a suit for specific performance of an
agreement to one for declaration of title and possession
followed by a prayer for specific performance of an
agreement of sale entered into between its assignee and
the vendors of the assignees. Along with that is the other
question, which very often raises its head in suits for
specific performance, that is, whether a stranger to an
agreement for sale can be added as a party in a suit for
specific performance of an agreement for sale in view of
Section 15 of the Specific Relief Act, 1963. The relevant
provision of Section 15 with which we are concerned is
contained in clause (a) thereof and entitles any party to
the contract to seek specific performance of such
CS(OS) No.2277/2010 Page 45 of 51


contract. Admittedly, the appellant herein is a third party
to the agreement and does not, therefore, fall within the
category of "parties to the agreement". The appellant
also does not come within the ambit of Section 19 of the
said Act, which provides for relief against parties and
persons claiming under them by subsequent title. This
aspect of the matter has been dealt with in detail in
Kasturi's case (supra). While holding that the scope of a
suit for specific performance could not be enlarged to
convert the same into a suit for title and possession,
Their Lordships observed that a third party or a stranger
to the contract could not be added so as to convert a suit
of one character into a suit of a different character.”

44. In the case of State of Madhya v. Union of India , AIR 2012
SC 2518, it was observed as under:
“19. Finally, the original plaint proceeds that the exercise
of power by the Central Government by passing the
impugned Notifications dated 02.11.2004 and 04.11.2004
under Sections 58(3) and 58(4) of the MPR Act was
arbitrary, unjust and unfair and had resulted in serious
anomalies in the apportionment of assets and liabilities.
In our view, after praying for such relief, if the amendment
as sought for by the plaintiff is allowed and the plaintiff is
permitted to challenge the vires of the said provisions,
then the very basis on which the plaintiff is claiming its
right to apportionment of assets, rights and liabilities of
the undivided Board will cease to be in existence and the
entire suit of the plaintiff will be rendered infructuous.
Moreover, it is settled principle of law that leave to defend
to amend will be refused if it introduces a totally different,
new and inconsistent case or challenges the fundamental
character of the suit.”

45. There is no force in the submission of learned counsel
appearing on behalf of plaintiff that proposed defendant No.7
Mr.Chugh was aware about pendency of suit at the time of
CS(OS) No.2277/2010 Page 46 of 51


purchasing the property as before filing of suit, he had already
entered into an agreement and received part of loan amount from the
bank.
46. The proposed amendment, if read carefully, on the face of it
fundamentally changes the basic nature and character of the suit and
cannot be allowed.
47. The relief of specific performance of the agreement to sell and
other consequential reliefs such as declarations, cancellation and
injunctions under the Specific Reliefs Act are equitable reliefs and
discretionary in nature. It is well settled principle of law that reliefs
under the Specific Reliefs Act are not available to a party who is guilty
of latches and/or has not come to the court with clean hands. In the
present case, the plaintiff is guilty of gross latches and delay in as
much as his knowledge of third party rights in the suit property were
th
brought to his notice on 24 February, 2010 and the proposed
application for amendment has been filed in January, 2012.
48. In the course of arguments, the learned counsel for the plaintiff
sought to rely heavily on the principle of lis-pendens under Section 52
of Transfer of Property Act. It is pertinent to mention that the doctrine
of lis-pendens does not invalidate the title over the property, but
would only make it subject to the result of the suit.
49. With regard to the decision referred by the learned counsel
appearing on behalf of the plaintiff in the case of Thomson Press
(India) Limited (Supra), in the said case, the sale of the property was
made in violation of the injunction order and the purchaser had made
an application for being impleaded in the suit. Such an application
was dismissed by the High Court and at para 54 of the said judgment,
CS(OS) No.2277/2010 Page 47 of 51


it was upheld as the correct order in terms of Order 1 Rule 10 CPC.
This is not the situation in the present case. The transferee i.e.
Mr.Chugh does not wish to be impleaded as a party to the present
suit being innocent and bonafide purchaser. The ratio of the said
case is not applicable to the facts of the present case.
50. The Apex Court in the case of Virgo Industries (Eng.) Pvt.
Ltd. (Supra) considers the object and intent behind the enactment of
Order 2 Rule 2 of CPC, whereafter holds that the rule engrafts a
laudable principle that discourages/prohibits vexing the defendant
again and again by multiple suits. The said decision, while observing
that the cause of action in the latter suit must be the same as in the
first suit, reiterates that there is no requirement for ascertaining the
true meaning of expression; “cause of action” and in the process,
goes on to hold that foundation for relief of permanent injunction
amongst others, furnishes a complete cause of action to the plaintiff
in suing for relief of specific performance as well.
51. The case of Virgo Industries (Eng.) Pvt. Ltd. (supra) has no
applicability to the facts of this case. In the said case, the prayer
under Order II Rule 2 CPC was not granted. The Court also held that
the relief of specific performance was premature on the date of filing
of the suit and there is no bar to file a suit claiming a relief which the
plaintiff has become entitled to at subsequent point of time. In the
present case, the relief of specific performance, if any, admittedly was
available to the plaintiff at the time of filing of the suit as any relief
under Order II Rule 2 CPC is to be given by the Court on such
grounds which are pleaded in their application and if the Court is
satisfied that the reasonable grounds existed for not claiming a relief
CS(OS) No.2277/2010 Page 48 of 51


immediately, relief under Order II Rule 2 CPC may be given. The
application of the plaintiff under Order II Rule 2 CPC does not contain
any ground whatsoever to seek such a leave. The plaintiff has not
even argued the application.
52. The case of Guruswamy Nadar vs. Lakshmi Ammal (D)
through LRs and Ors (supra) only discusses the effect of lis-
pendens and the only question that was argued was whether the
principle of lis-pendens will be applicable or section 19 of the Specific
Relief Act will have overriding effect. The Supreme Court held that
the principle of lis-pendens will apply. However, the question as to
whether the purchaser who has purchased after the filing of the suit is
a necessary party to the suit for specific performance was not
decided. The case has no application to the facts of the present
case.
53. The case of Jayaram Mudaliar vs. Ayyaswami and Ors.
(supra) pertains to a sale of joint family property and the effect of
such sale during the pendency of the suit. There is no decision on
the question as to whether a transferee pendent-lite is a necessary
party and can be impleaded at the instance of the plaintiff.
54. It is not denied by the plaintiff that various loan agreements
were executed between the plaintiff and defendants No.1 to 3. Even
agreement to sell was between them. The defendants No.4 to 6 are
not parties to the agreements and have no privity of contract with the
plaintiff. In the plaint, the defendant No.6 is mentioned as proforma
party. Thus, there is no cause of action against the defendants No.4
to 6. From the entire gamut of the matter, this Court is of the view that
the relief sought by the plaintiff against the said defendants, i.e.
CS(OS) No.2277/2010 Page 49 of 51


defendants No.4 to 6 is barred by law. Therefore, for the reasons
mentioned above, the suit against the defendants No.4 to 6 is not
maintainable and no cause of action exists against them. The prayer
made in the application, being I.A. No.6657/2011 filed by defendants
No.1 to 3, is partly allowed.
55. It is also not disputed by the plaintiff that loan agreements
contain an arbitration clause which provides for enforcement of an
obligation as enumerated in the agreement in case of any dispute
arising out of the agreement. The arbitration clause in the loan
th
agreement dated 27 February, 2009 is as under:
“Any and all disputes arising out of or in connection with
this Agreement and the Schedule (s) of Terms attached
hereto or the performance of this Agreement shall be
settled by arbitration to be referred to a sole arbitrator to
be appointed by the Lender and the award thereupon
shall be binding upon the parties to this Agreement. The
place of the arbitration shall be in Delhi, in accordance
with the provisions of the Arbitration and Conciliation Act,
1996 and any statutory amendments thereof and will
also be under the jurisdiction of the court at Delhi.”

56. The plaintiff has not taken any steps for arbitration. The plaintiff
has also not filed the suit for recovery of loan amount against the
defendants No.1 to 3. In the amendment application an alternative
prayer is sought that a decree be passed against them for sum of
Rs.8,50,36,918/- who have not denied the fact of having received the
loan amount from the plaintiff. An existence of arbitration clause has
not been denied by the plaintiff. It was merely stated that the subject
matter of the present suit cannot be referred to arbitration because
there are parties other than defendants No.1 to 3 against whom the
CS(OS) No.2277/2010 Page 50 of 51


reliefs are being sought, which is permissible against the third party
i.e. defendants No.4 to 6 and proposed defendant No.7 who cannot
become parties to the arbitration proceedings. The suit is the most
appropriate remedy. As the suit is already held not to be
maintainable, therefore, the prayer made in the application, being I.A.
No.6654/2011, is allowed.
57. The relief with regard to declaration of the second charge and
the mandatory injunction as per paragraph 1 (a) and 1 (b) above
cannot be claimed against defendants No.4 to 6. The suit in respect
thereof is not maintainable.
58. The suit of plaintiff therefore for the relief of declaration and
mandatory injunction in respect of the second charge is clearly not
maintainable against defendants No.4 to 6 and proposed defendant
No.7. The plaint is liable to be rejected as the same is barred by law.
59. As far as the suit against the defendants No.1 to 3 is
concerned, the loan amount is recoverable as per law. Since there is
an arbitration clause in the agreement which is not denied by the
plaintiff, the plaintiff has to take the necessary steps for invoking the
arbitration under the provisions of Arbitration and Conciliation Act,
1996. The suit against the defendants No.1 to 3 cannot continue in
the presence of arbitration clause.
60. In view of the same, the plaint is rejected. All interim orders are
vacated. The pending applications are also disposed of accordingly.
61. No costs.
(MANMOHAN SINGH)
JUDGE
JULY 01, 2014
CS(OS) No.2277/2010 Page 51 of 51