TaxTMI 
TaxTMI 
2012 (7) TMI 1088
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....; These Appeals arise from a judgment dated 19 July 2010 of a Learned Single Judge on a Motion for interim relief in a suit. When an application for ad interim relief came up for hearing before the Learned Single Judge, an objection to the maintainability of the suit was raised on behalf of the First Defendant on the ground that the claim was barred by limitation. The Learned Single Judge was requested to raise a preliminary issue under Section 9A of the Code of Civil Procedure, 1908. The Learned Judge accepted the contention that an issue under Section 9A would have to be raised. The Court held that no case for the grant of ad interim relief, within the meaning of Section 9A(2) was made out on the ground of delay. However, the Learned Single Judge proceeded to dispose of the Motion for interim relief on the ground that since affidavits have been filed and parties were heard at length, it would not be appropriate or proper to have a hearing confined only to the disposal of the application for ad interim relief. Two appeals have been filed in these proceedings. The first appeal is by Mr. Nusli Neville Wadia, the Plaintiff; while the second appeal is by Ferani Hotels Private Limit....
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....nits in such buildings/s, so that ultimately the building/s that would be so constructed by the Company would be conveyed and transferred by the Company in favour of the respective purchaser/s or a Co-operative Society or Limited Company or a Condominium (as may be decided upon by the Company) to be formed of such prospective purchasers or Unit holders/ Flat holders/co-operative society or limited company so that such purchaser / organisation would then become the owner of such building/s." 4. Under the agreement the administrator was to be paid 12% of "all gross realizations from the disposal/ transfer (by any and all formats) as aforesaid". The minimum share of the administrator was to be Rs. 75 Crores, payable within a period of ten years from the date of the agreement. The development of the immovable property was to be in the control of the members of the Raheja family including a corporate body under its control. The agreement envisaged that the administrator would continue to be in juridical possession of the land. The administrator was to transfer title and handover formal and juridical possession of the land to the purchasers of the building constructed by Ferani. Claus....
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....y Ferani to the Fifth Defendant, which according to the Plaintiff is a group company of the Raheja family. On 16 May 2000, a reply was addressed by the administrator to Ferani specifically drawing attention to the fact that clause 8(a) of the agreement contemplated a sale or transfer of flats to third parties. The administrator contended that the sales of the flats in question were not genuine sales and that consequently the obligation to deposit 12% of the sale values would not be taken as having been fulfilled. In the circumstances, Ferani was called upon to disclose "the ultimate genuine sale" made by the sister and associated companies of Ferani to third parties to whom the flats were allegedly sold at a notional value. The amount paid towards the share of the administrator, it was stated, would be treated as an on account payment to be finally adjusted against "genuine sales". 7. On 9 June 2000, Ferani addressed a communication to the administrator accepting that the Fifth Defendant was a "sister concern", but claimed that it had a separate entity and was a third party within the meaning of clause 8(a) of the agreement. According to Ferani the sale price which is reflected ....
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....r the suit was instituted. On behalf of Ferani an adjournment was sought to file an affidavit in reply. In the affidavit filed by Ferani to oppose the application for ad interim relief, an objection was raised to the maintainability of the suit on the ground that the claim was barred by limitation. The Learned Trial Judge was requested to frame a preliminary issue on the question of limitation under Section 9A of the Code of Civil Procedure, 1908. The Motion was listed before the Learned Single Judge on 16 June 2010 for ad interim relief. 10. By a judgment dated 19 July 2010 the Learned Single Judge held that :- (i) No case for the grant of ad interim relief was made out having regard to the delay on the part of the Plaintiff, the administrator, in moving the Court; (ii) A preliminary issue under Section 9A would have to be framed; (iii) Since submissions have been heard at length following the filing of affidavits, the entirety of the Motion for interim relief would have to be disposed of. Accordingly the Learned Single Judge issued a direction to the effect that Ferani shall not put any party, either a genuine third party or any related party incl....
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....itiously as possible and shall not in any case be adjourned to the hearing of the suit. (2) Notwithstanding anything contained in sub-section (1), at the hearing of any such application, the Court may grant such interim relief as it may consider necessary, pending determination by it of the preliminary issue as to the jurisdiction." 13. At the outset it will be necessary to note that insofar as this Court is concerned, it is common ground that the following two positions in law are settled :- (i) Whether a plea of limitation as a bar to the Court entertaining the entire suit can be raised as an issue of jurisdiction under Section 9A is concluded by the following judgments : (a) Foreshore Co-operative Housing Society Limited v. Praveen Desai (2006(6) Bom CR 230 (Single Judge) and 2009(1) Bom CR 757 (DB); (b) Royal Palms (India) Pvt. Ltd. v. Bharat Shantilal Shah (2009) 2 Bom CR 622 (DB); (c ) Mukund Ltd. v. Mumbai International Airport (2011(2) MLJ 936 (DB); (d) Jagshi Shah v. Shaan Builders (2012) 3 Bom CR 770 (DB). (ii) Whether Section 9A is inconsistent with the provisions of Order 14 Rule 2 and will therefore stan....
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.... the Court from granting such interim relief as it may consider necessary pending the decision on the question of jurisdiction. The judgment of the Supreme Court indicates, that merely because an objection to jurisdiction is raised, "the Court does not become helpless forthwith - nor does it become incompetent to grant the interim relief". At the same time the objection to jurisdiction has to be determined at the earliest possible moment. Following the decision of the Supreme Court in Bagasarwalla, several judgments of this Court have elucidated upon the ambit and scope of Section 9A. These include judgments of the Division Benches in :- (i) Meher Singh v. Deepak Sawhny (1999(1) Bom. C.R. 107); (ii) Smithkline Beecham Consumer Healthcare BMBH v. Hindustan Lever Limited (2003 Vol.105(2) Bom.L.R. 547); (iii) Foreshore Co-operative Housing Society Ltd. v. Praveen Desai (2009(2) Mh. L.J.28); (iv) Royal Palms (India) Pvt. Ltd. v. Bharat Shantilal Shah (2009(2) Bom.C.R. 622); (v) Mukund Limited v. Mumbai International Airport (2011(2) Mh.L.J. 936); (vi) Associated Bombay Cinemas Private Limited v. Jamni S. Ramchandani (2011 Vol. 113(2....
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....isdiction of the Court which tries the proceedings and that a finding on the plea in favour of a party raising it would oust the jurisdiction of the Court, the Division Bench in Foreshore Cooperative Housing Society Limited (supra) held that the question of limitation would constitute a question of jurisdiction within the meaning of Section 9A. The decision in Foreshore Co-operative Housing Society has been followed by a Division Bench in Royal Palms, Mukund and Associated Bombay Cinemas (supra). 17. But, the submission which has been urged on behalf of the administrator by learned Senior Counsel is twofold. Firstly, it has been submitted that an objection, as to jurisdiction, of the nature that is contemplated by sub section (1) of Section 9A is an objection which must be capable of disposing of the entirety of the suit if it is upheld. In the present case, it has been submitted that several transactions between the parties which are sought to be rescinded have admittedly taken place within a period of three years of the date of the institution of the suit and those in any event would be within limitation. Consequently, it was submitted that even if the objection that has been ....
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....t that in certain cases the provision can be capable of being abused by a Defendant. A Defendant may conceivably raise an objection as to jurisdiction merely with a view to delay the final disposal of a Motion for interim relief, cognizant of the fact that an ad interim application of the kind which is contemplated under sub section (2) of Section 9A may not in a given situation result in the grant of wide ranging interim reliefs of the kind that may be sought by a Plaintiff. We are not inclined to enter a finding that such is the case in the present case. For, as we would indicate prima facie, the objection as to jurisdiction here cannot by any means be regarded as being frivolous or lacking in bonafides. But, the possibility of an abuse by the Defendants, which the practical unfolding of the provision of Section 9A indicates, in the experience of the Trial Judges of this Court, would emphasize the necessity of allowing a modicum of discretion on the part of the Trial Judge while dealing with an application for the raising of a preliminary issue under Section 9A. The judgment of the Supreme Court in Bagasarwalla's case provides some element of guidance when the Supreme Court n....
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.... Small Causes Court in the city of Mumbai. Alternately, the objection may be to the lack of territorial jurisdiction or on the ground of a lack of pecuniary jurisdiction. Equally an objection as to jurisdiction can well be in respect of a part of the cause of action which is set up in the suit. For instance, even on the issue of territorial jurisdiction, a part of the cause of action may fall within the jurisdiction of the Court, while another part may fall outside. An illustration of that nature is to be found in the judgment of the Supreme Court in Sandeep Polymers (P) Ltd. v Bajaj Auto Ltd. (2007) 7 SCC 148). The significant aspect is that if an objection to the jurisdiction of the Court to entertain a part of the cause of action which is set up in the suit is raised and sustained, that part of the cause of action would fall outside the scope of adjudication in the suit before the Court before which the objection is raised. The object of the legislature was to preclude the Plaintiff from pursuing an application for interlocutory relief though the claim on the basis of which the application is founded falls outside jurisdiction. This rationale would be relevant both to a situatio....
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....that though the Fifth Defendant was a sister concern, it was a separate legal entity and therefore a third party within the meaning of clause 8(a). In addition, the First Defendant offered to sell an equal number of flats to the Plaintiff at the same rate and on the same terms and conditions. Subsequently, on 5 April 2002, the administrator was informed of the sale by the First Defendant to the Sixth Defendant, another sister concern of three units in Building M on C.T.S. 1406A/3/8. On 23 April 2002, the Plaintiff raised an objection to the sale on the ground that this was not a genuine sale to a third party. By a communication dated 2 May 2002 the First Defendant informed the Plaintiff that the sale was a genuine sale in respect of which Form 37-I had been filed with the Income Tax Department. The contention of the First Defendant is that between 2000-2002 the Plaintiff was aware of the position of the First Defendant that although the Fifth and Sixth Defendants were associated companies, being independent legal entities, they were a third party within the meaning of the agreement. According to the First Defendant the sales made to Defendants 8 to 49 were third party sales and the....
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....mination under Order 14 Rules 1 and 2. What the legislature has contemplated is that an issue of jurisdiction has to be disposed of first before the interlocutory application can be disposed of finally. Disposing of the Motion finally without the issue of jurisdiction being resolved, would clearly be in the teeth of the provisions of Section 9A(1). Section 9A(1) clearly mandates that the issue of jurisdiction cannot be relegated to the stage of the hearing of the suit. Moreover, that issue has to be decided before the application for interlocutory relief can be finally disposed of. In these circumstances, we are of the view that the order of the Learned Single Judge disposing of the Motion finally is unsustainable and would to that extent has to be set aside. Consistent with the provisions of Section 9A(1) which require the raising of the issue of jurisdiction as a preliminary issue, the Learned Single Judge would have been within jurisdiction in entertaining an application for ad interim relief within the meaning of sub section (2) of Section 9A. The hearing of the Motion for interim relief would have to be taken up after the determination of the preliminary issue under Section 9A....
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....nies viz. Defendants 14 and 15. According to the Plaintiff in pursuance of these negotiation letters, Ferani purported to sell identified areas to its front companies at a stated price. These negotiation letters contain an apparently innocuous clause stating that in the event that there was an increase or decrease in the areas, the consideration would be proportionately adjusted. The administrator was paid his share of consideration stated in the initial letters of negotiation of 2002. Subsequently, when the copies of the negotiation letters of May 2005 were forwarded to the administrator, he realized that although the area was much higher, the rate was the same. The allegation is that by adopting this modus operandi, the administrator was deprived of his share of 12% of the genuine consideration; (iii) The third allegation of fraud is that the First Defendant entered into leave and licence agreements with Defendant No.31 dated 21 November 2003 in respect of areas yet to be transacted under which it would take a substantial deposit and licence fee from the licensee. The leave and licence agreement was disclosed to the administrator only under a letter dated 5 April 2005 an....
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....ess of consideration. It has been urged that the plaintiff has not produced any material to support the allegation regarding inadequacy of consideration. It is urged that the Single Judge rightly held that the issues in dispute would be a matter of accounts. It has been urged that monthly intimation letters were addressed to the plaintiff, in relation to all transactions, between 2000 and 2006 and no objections were forthcoming, on the consideration for the transactions. The fact that the auditors, who were nominees of the administrator did not dispute the accounts rendered with relation to the transactions dispels any allegation of fraud. Learned Senior Counsel submitted that, barring one case, no member of the Raheja family is a director / shareholder / investor in any of the companies. It has been further submitted that out of the 44 transactions that have been challenged, 34 are barred by limitation. It has also been urged that of the 10 transactions that are not allegedly barred by limitation, several are with companies which involve independent third party investors, and that no member of the Raheja family is a director or shareholder in any of the buyer companies in these tr....
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.... having entered into a partnership or an association of persons. 27. In construing the manner in which parties understood clause 8(a), regard must be had to the contemporaneous conduct. On 5 April 2002 Ferani informed the administrator of the receipt of an amount of Rs. 1.85 Crores for the sale on partnership basis of units in Building M. The sale was in favour of the Sixth Defendant, Palm Grove Beach Hotels Pvt. Ltd, which was stated to be a group company. On 23 April 2002, in a letter addressed on behalf of the administrator to Ferani, it was contended that Palm Grove Beach Hotels Pvt. Limited was not a third party within the meaning of clause 8(a) of the agreement and that the sale was not a genuine sale. In response Ferani by its letter dated 2 May 2002 stated thus : "For all practical purposes the sale to Palm Grove Beach Hotels Pvt. Ltd. has to be treated as the sale to a "third party" as the sale has been done to Palm Grove Beach Hotels Pvt. Ltd. for its business purposes. In the circumstances aforesaid the above sale has to be treated as a "genuine sale" and you cannot treat it as "on account payment" to be finally adjusted against the genuine sale effected by P....
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....uent thereto when those provisions ceased to apply. On the basis of those charts, it has been sought to be urged that the transactions which have been challenged by the administrator are in several cases at rates which are much higher than those transactions which have been accepted by the administrator. In response, the submission which has been urged on behalf of the administrator is that the transactions which have been accepted by him were transactions with genuine third parties which he had no locus to question under the terms of the agreement. In rejoinder and towards conclusion of the submissions, a computation has been tendered on behalf of the administrator to the Court on the basis of the rates as contained in the ready reckoner with a view to urge that the rates at which Ferani transacted were lower than the rates which were prevailing in the ready reckoner. We find merit in the submission which has been urged on behalf of Ferani that it would be inappropriate for this Court, sitting in appeal to allow such material to be adduced for the first time, absent such a submission being urged before the Learned Single Judge and particularly in the absence of either pleadings or....
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....ni to send copies of agreements entered into pursuant to the transactions with Defendants 8 to 13, which agreements (negotiation letters) Ferani then submitted. On 23 April 2002 the administrator objected to a transaction entered into with the Sixth Defendant on the ground that being a group company the transaction was not with a genuine third party. On 2 May 2002 Ferani informed the administrator that for all practical purposes, the sale in favour of the Sixth Defendant had to be treated as a sale to a third party and was a genuine sale. On 2 June 2005, the administrator objected to the transaction that had taken place with Defendant No.31. On 2 April 2005, an MoU was entered into between Ferani and the Fifth and Sixth Defendants for the purchase of certain non-residential units of which copies were forwarded on 5 April 2005. On 5 April 2005 Ferani addressed communications to the administrator intimating the receipt of sums under letters of negotiation. Admittedly, several meetings took place between the parties on and after May 2005 when the administrator objected to the transactions. On 2 November 2005 the administrator in a communication suggested that after a notice of seven d....
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....t of the administrator under the agreement dated 2 January 1995 is to the receipt of a share in the gross total consideration equivalent to 12%. The grant of injunctive relief restraining Ferani from selling its units would therefore neither be in accordance with the equities of the situation nor the mutual rights and obligations of the parties. 33. During the course of the hearing the Court has been informed by learned Senior Counsel appearing on behalf of Ferani that the following payments have been made or, as the case may be, deposited in pursuance of the agreement dated 2 January 1995 : (i) Between 5 April 1996 and 9 January 2008 : Rs. 144 Crores deposited in a designated account; (ii) Between 9 January 2008 and May 2008 : Rs. 14.54 Crores paid directly; (iii) Between 14 May 2008 and 2 July 2009 : Rs. 7.92 Crores deposited in the designated account; (iv)Between 6 July 2009 till date : Rs. 57 Crores deposited in an account maintained in the Indian Bank. 34. Accordingly an amount of Rs. 223 Crores has been deposited or, as the case may be, paid directly. We are of the view that the ends of justice would be met if, pending the hearing and....