Bombay High Court
Central Depository Services (India) … vs Rajendra Yeshwant Shah And 13 Ors. on 12 August, 2025
2025:BHC-OS:13250-DB
Neeta Sawant APP-104-109-2019-FC
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO. 104 OF 2019
IN
CHAMBER SUMMONS NO. 55 OF 2009
IN
EXECUTION APPLICATION NO. 329 OF 1997
IN
ARBITRATION PETITION NO.112 OF 1997
WITH
NOTICE OF MOTION NO. 428 OF 2019
WITH
NOTICE OF MOTION NO. 162 OF 2019
Central Depository Services (India) Ltd. ....Appellant
: Versus :
Rajendra Yeshwant Shah and Ors. ....Respondents
WITH
APPEAL NO. 109 OF 2019
IN
CHAMBER SUMMONS NO. 55 OF 2009
IN
EXECUTION APPLICATION NO. 329 OF 1997
IN
ARBITRATION PETITION NO.112 OF 1997
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WITH
INTERIM APPLICATION (L) NO. 32757 OF 2022
WITH
NOTICE OF MOTION NO. 200 OF 2019
WITH
INTERIM APPLICATION (L) NO. 32757 OF 2022
Amu Shares and Securities Limited ....Appellant
: Versus :
Rajendra Yeshwant Shah and Ors. ....Respondents
Mr.Venkatesh Dhond, Senior Advocate with Mr. Rohan Kadam,
Mr. Vaibhav Singh, Ms. Radhika Indapurkar, Mr. Rahil Shah and
Mr. Pranav Chandhoke i/by. Veritas Legal, for the Appellant in Appeal
No. 104 of 2019.
Mr. M.M. Vashi, Senior Advocate with Mr. Ankur Jain i/by. Mr. Ram
Singh for Appellant in Appeal No.109 of 2019.
Mr. Rohaan Cama i/by. Mr. Mehul A. Shah for Respondent Nos.1 to 3
in both the Appeals.
CORAM : ALOK ARADHE, CJ. &
SANDEEP V. MARNE, J.
Judgment Reserved on : 4 August 2025.
Judgment Pronounced on : 12 August 2025.
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JUDGMENT :
(Per Sandeep V. Marne, J.)
1) These Appeals are filed challenging the order dated
9 January 2019 passed by the Single Judge of this Court in
Chamber Summons No.55/2009 filed in Execution Application
No. 329/1997. By the impugned order, the learned Single Judge
has inter-alia directed the Appellants to handover the amount of
Rs. 1,79,62,131.56/- to a private Receiver. The learned Single Judge
has further directed the Appellant-Central Depository Services
(India) Ltd. (CDSL) to transfer and deposit with the Receiver all
shares lying in the Demat Account of Late Ashok Bimal Ghosh as
on 6 May 2005 together with all the benefits thereon. Respondent
No.7-CDSL as well as Respondent No.1-Amu Shares & Securities
Ltd. (Amu) are aggrieved by the order dated 9 January 2019 and
have filed Appeal No.104/2019 and Appeal No.109/2019
respectively.
Facts
2) Brief facts leading to filing of the appeals are as under:
Mr. Yashwant N. Shah secured Award dated 16 January 1987 from
the Bombay Stock Exchange Arbitration Panel (Award
No.79/1997) against Mr. Ashok Bimal Ghosh for principal sum of
Rs.3,58,29,000/-. Ashok Bimal Ghosh challenged BSE Award in
Arbitration Petition No. 127/1997 under Section 30 of the
Arbitration Act, 1940 (Act of 1940). On the other hand, Yashwant
Shah applied for a judgment and decree in terms of the Award
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Neeta Sawant APP-104-109-2019-FCvide Arbitration Petition No. 112/1997 filed under Section 17 of
the Act of 1940. On 29 September 1997, the Single Judge of this
Court dismissed Arbitration Petition No.127/1997 filed by Ashok
Bimal Ghosh and confirmed the Award as a decree of the Court.
Ashok Bimal Ghosh was directed and ordered to pay a sum of Rs.
3,58,29,000/- alongwith interest at the rate of 18% p.a. Yashwant
Shah filed Execution Application No. 329/1997 for execution of
the decree dated 29 September 1997. Though Ashok Bimal Ghosh
had filed Appeal No.63/1998 against the order of the learned
Single Judge, apparently no stay was granted therein. In the
meantime, Yashwant Shah also obtained decree dated 24 January
2000 in pursuance of a separate award against Ms. Lily Ghosh
(wife of Ashok Bimal Gosh) in Arbitration Petition No. 410/1999
for the principal sum of Rs.34,51,570.50/- with interest. It appears
that Lily Gosh was declared insolvent in Insolvency Petition No.
23/2002 taken out by the Award Holders vide order dated 14
December 2004.
3) Yashwant Shah passed away and Respondent Nos. 1
to 3, who are his legal heirs, filed Chamber Summons
No.534/2005 in Execution Application No. 329/1997 against
Ashok Bimal Ghosh (Respondent No.1 therein), one ABG
Securities Pvt. Ltd (Respondent No.3 therein), LANS
Communication (Respondent No.4 therein), Ashok Film and
Finance (Respondent No.5 therein) and Lily Agro Products
(Respondent No.6 therein) in which an ad-interim order was
passed dated 6 May 2005 restraining Respondent Nos.1 and 3 to 6
therein from transferring, selling, alienating or encumbering any
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property of Respondent Nos.1, 3 to 6 or from creating any third
party rights in any of the properties and assets of Respondent
Nos.1 to 6 including those shown in Schedule-IV to VIII appended
to the Chamber Summons. Schedule-VIII described all shares held
in physical and Demat form with NSDL and CDSL in the name of
Respondent Nos.1 and 3 to 6. The advocate of Respondent Nos.1
to 3 (heirs of Yashwant Shah) wrote to CDSL on 1 June 2005
communicating the factum of passing of award against ABG
Securities Pvt. Ltd. (ABG Securities) and well as Court’s order of
ad-interim injunction and requested CDSL to act on the same. On
10 June 2005, the CDSL replied to the advocate’s letter informing
him that CDSL had taken note of the order and were in the
process of giving effect thereto. On 6 July 2005, advocate of Shahs
forwarded compilation of documents to the advocate of Amu
Securities in which copy of ad-interim order dated 1 June 2005 was
annexed. The advocate of Shahs also wrote to CDSL on 16 August
2005 about order dated 19 December 2004 passed in Insolvency
Petition, as well as order dated 6 May 2005 passed in Chamber
Summons No.534/2005.
4) In April 2006, Ashok Bimal Ghosh passed away. In
Appeal No.63/1998 filed by Ashok Bimal Ghosh, consent terms
were entered into under which Shah received amount of
Rs.8,23,59,900/- as against the then outstanding dues of
Rs.9,62,87,588/- (inclusive of interest as on 4 February 2007). The
Appeal was accordingly disposed of in accordance with the
consent terms on 15 March 2007. On 26 April 2007 and
21 June 2007, the advocate of Shah’s wrote to their advocate’s
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seeking details of share status of ABG Securities for the period
between 1 April 2002 to 30 April 2007. Similar enquiry was also
made with CDSL vide letter dated 7 May 2007 and 21 June 2007. In
reply dated 6 July 2006, CDSL informed that it had found the
accounts of Ashok Bimal Ghosh and ABG Securities based on the
address and the transaction statements of Demat account were
supplied to the advocate of Shah’s who in the meantime had
become a private receiver, wrote to CDSL on 30 July 2007 and
4 August 2007 requesting for account details and copies of further
documents. The CDSL furnished the requisite documents on
9 August 2007.
5) In the above background, the private Receiver wrote to
CDSL on 20 September 2007 informing it that an injunction had
been passed against Ashok Bimal Ghosh and ABG Securities and
that the shares from their accounts were transferred in breach of
injunction. The Receiver called upon CDSL to deposit shares
transferred out of Ashok Bimal Ghosh’s account as well as sought
further transaction details. The Advocate of CDSL replied to the
private Receiver on 1 October 2007 that it was not party to any of
the proceedings and no order was passed against it directing it to
freeze the Demat account. On 10 December 2007, a private
Receiver raised a claim of joint and several liability of CDSL and
Amu Securities in respect of transferred shares from the account
of ABG Securities. Thereafter, certain correspondence took place
between the parties.
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6) Respondent Nos.1 to 3 took out Chamber Summons
No. 55/2009 inter-alia seeking direction for bringing back shares
transferred out of the accounts of ABG Securities or in the
alternative to bring to the Court monetary value of shares
transferred out of the account of ABG Securities. The learned
Single Judge has passed order dated 9 January 2019 in Chamber
Summons No. 55/2009 directing inter-alia the Appellants to pay to
the private Receiver a sum of Rs.1,79,62,131.56/- representing
monetary value of shares transferred out of the Demat Account of
ABG Securities. Aggrieved by the order dated 9 January 2019,
CDSL and Amu have filed the present Appeals.
Submissions
7) Mr. Dhond, the learned senior advocate appearing for
CDSL would first canvass submissions about maintainability of
the Appeals under Clause-XV (5) of the Letters Patent. He would
submit that the impugned order has been passed in the execution
proceedings of decree dated 29 September 1997 under Section 17
of the Act of 1940. That once decree is made, the Award ceased to
have any independent character or legal status and therefore it
cannot be contended that the Award is put in execution. What is
sought to be executed is a decree under the provisions of the Code
of Civil Procedure, 1908 (the Code). That there is a marked
difference in the statutory schemes of the Act of 1940 and the
Arbitration and Conciliation Act, 1996 (Act of 1996). That under
the Act of 1996, the Award has an independent character and
status, and under Section 36 whereof, the Award can be enforced
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in accordance with the Code in the same manner as if it is a
decree. That the Act of 1996 postulates execution of the Award
without there being any need to obtain a decree. That the Act of
1996 introduces a deeming fiction by providing that Award can be
enforced in the same manner as a decree. That therefore execution
of Award under the Act of 1996 is a proceeding arising under that
Act and that therefore right to Appeal arising out of such
proceedings would necessarily be under the Act of 1996 and
would be governed by the provisions of Section 37.
8) Mr. Dhond would further submit that the distinction
between execution of an Award under the Act of 1996 vis-à-vis the
Act of 1940 was noticed by the Division Bench of this Court in Jet
Airways (India) Ltd. Versus. Subrata Roy Sahara and others 1 in which it
has been recognized that an Appeal under Clause-XV of the
Letters Patent would lie where the proceedings for execution lie
under the Code. That the impugned order is a final adjudication of
CDSL’s liability to restore the status-quo and since it has the
‘trappings of finality’, the Appeal would lie under Clause XV of
the Letters Patent as held by the Apex Court in Shah Babulal Khimji
Versus. Jayaben D. Kania and another2.
9) So far as the merits of the impugned order are
concerned, Mr. Dhond would submit that the learned Single Judge
was exercising jurisdiction under Section 47 of the Code, which
conferred jurisdiction only over the parties to the suit and their
1 2011 SCC OnLine Bom 1379
2 (1981) 4 SCC 8
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representatives. That the Executing Court cannot go beyond the
decree. That it was impermissible to pass any order against CDSL,
who was not a party either to arbitration proceedings or even to
the execution proceedings. That the Court in execution could not
implead a new Judgment Debtor as the same would amount to
going beyond the decree. That fixing liability against CDSL goes
beyond the jurisdiction of the Executing Court as a question not
arising between the parties to the suit is sought to be decided.
10) Mr. Dhond would further submit that the learned
Single Judge could not have taken recourse to inherent powers
under Section 151 of the Code when other remedies in the form of
Section 36 read with Order XXI Rule 32 were available. That it is
settled law that inherent powers of the Court are not to be used for
the benefit of a litigant who has a remedy under the Code.
Reliance in this regard is placed on judgments in State of Uttar
Pradesh and others Versus. Roshan Singh (Dead) by LRS. and another 3
and Vinod Seth Versus. Devinder Bajaj and another4.
11) Mr. Dhond would further submit that an order to
restore status-quo ante pursuant to a breach of an injunction can be
ordered only against a party to that injunction and not a stranger
to the action. That there was no injunction directing CDSL to
freeze the accounts and therefore the question of holding CDSL
liable to breach did not arise. That an injunction operates in
personam and against the persons named in the writ and it does
3 (2008) 2 SCC 488
4 (2010) 8 SCC 1
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not take effect against persons who are not party to the
proceedings. That the learned Single Judge erred in holding that
CDSL had aided and abetted the breach by the Judgment Debtor.
That the legal concept of aiding and abetting a breach relates to
liability for criminal contempt. On the other hand, the person
against whom order is passed is liable for civil contempt. That the
distinction is borne out by judgment of the Apex Court in Sita Ram
Versus. Balbir alias Bali5. That aiding and abetting by a stranger
does not tantamount to disobeying an injunction which only
operates against a party. That even for an action of criminal
contempt to lie, there was a high burden of proof which is
required to be discharged by leading of evidence.
12) Mr. Dhond would further submit that CDSL has not
acted willfully or maliciously and had made sincere efforts to
assist the Decree Holder as well as private Receiver. That CDSL
caused a computer search of ‘Ashok Bimal Ghosh’ and ‘ABG
Securities Pvt. Ltd.’. That at that time, CDSL’s system executed
only exact match queries and therefore the search in the name of
‘ABG Securities Pvt. Ltd.’ did not yield any results. That CDSL has
filed application under Order XLI Rule 27 of the Code to take
additional evidence on record in the form of search logs to prove
that searches were carried out. That since CDSL has acted
bonafidely, no liability can be fastened against it. That in any case,
there is no statutory duty owed by CDSL to Shah’s. He would
place reliance on Sections 10(2) and 10(3) of the Depositories Act
in support of the contention that depository does not enjoy any
5 (2017) 2 SCC 456
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rights in respect of any securities held by it and all liabilities in
respect of the securities are owed by the beneficial owner.
13) Lastly, it is submitted by Mr. Dhond that shares worth
Rs.70.66 lakhs were transferred before CDSL was apprised of the
injunction. That therefore CDSL cannot be held liable for bringing
the entire sum of Rs.1.80 crores and without prejudice to the other
contentions, he would submit that the impugned order deserves
to be modified to this extent.
14) Mr. Vashi, the learned Senior Advocate appearing for
Amu would adopt the submissions of Mr. Dhond in respect of
maintainability of the Appeal. Additionally, he would submit that
though Amu was party to the application in which ad-interim
injunction was granted, neither any relief was sought nor the same
was granted against Amu. That Amu is just a broker and cannot
be held liable in absence of any injunction being granted against it.
That there is no garnishee order passed against Amu. That the
Chamber Summons in which ad-interim injunction was granted
was subsequently withdrawn. Mr. Vashi would submit that the
advocate of Amu did not inform Amu about the exact nature of
ad-interim injunction. That in any case, no order was passed
against Amu. That Amu had a debit balance against ABG
Securities and had a lien over the shares against the said debit
balance. That Amu has bonafidely recovered the amount by selling
shares in the account of ABG Securities which was due to it from
ABG Securities. That Amu has produced the entire evidence of
bills, vouchers to prove the debit balance. That the learned Single
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Judge has erred in holding that mere creation of dispute of debit
balance by the Decree Holder was a reason enough to direct Amu
to bring back the amount of Rs.1.79 crores to the Court. Mr. Vashi
would rely upon judgment of the Apex Court in Sundaram Finance
Limited Represented by J. Thilak, Senior Manager (Legal) Versus. Abdul
Samad and another6 in support of the contention that even under
the 1996 Act, an Appeal against an order passed by a Court
executing the decree is maintainable. Mr. Vashi would accordingly
pray for setting aside the impugned order.
15) Mr. Cama, the learned counsel appearing for
Respondent Nos.1 to 3 in both the Appeals would submit that the
Appeal’s filed under Clause-XV of the Letters Patent are not
maintainable. That the impugned order has been passed in
proceedings initiated under the Act of 1940, which is a complete
Code in itself and that therefore an Appeal could only be filed in
accordance with the provisions of Section 39 thereof. That Section
39 of the Act of 1940 does not provide for remedy of appeal
against the impugned order. That the Act of 1940 is a complete
self-contained code for all matters arising out of arbitration
proceedings right till enforcement of the Award. In support, he
would rely upon the judgments in Union of India Versus. The
Mohindra Supply Co.7, Jet Airways (India) Limited (supra) and Fuerst
Day Lawson Ltd. Versus. Jindal Exports Limited 8. That execution
proceedings are continuation of the original arbitration
proceedings/suit. That therefore the order passed in
6 (2018) 3 SCC 622
7 AIR 1962 SC 256
8 (2011) 8 SCC 333
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the Chamber Summons becomes an order passed under or
pursuant to the Act of 1940.
16) Mr. Cama would further submit that even if the
impugned order is treated as the one passed under the Code in
execution, the Code applies to the Act of 1940 only by virtue of
Section 41 thereof. That therefore the orders passed in execution
proceedings are orders passed under Section 41 of the Act of 1940
and not under the Code. That the provisions of the Code for
execution are incorporated in the Act of 1940 by virtue of Section
41 and that therefore every order passed in execution would be an
order passed under Section 41 and not under the general law of
the Code. In support, he would rely upon judgment of the Delhi
High Court in Union of India and Ors. Versus. N. K. Pvt. Ltd. and Anr 9.
He would rely upon judgment of the Apex Court in Union of India
and others Versus. Aradhana Trading Co. and others10 in support of his
contention that every order passed even after conversion of award
into decree is still referable to Section 41 of the Act of 1940 and
that therefore Appeal can be filed only if such order is appealable
under Section 39.
17) On the merits of the impugned order, Mr. Cama would
submit that the learned Single Judge has exercised discretion
while passing a detailed and exhaustive order after considering all
the material on record and in absence of an element of perversity,
this Court would not be justified in interfering with the same.
9 AIR 1972 Delhi 202
10 (2002) 4 SCC 447
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Reliance is placed on judgment of the Apex Court in Wander Ltd.
and another Versus. Antox India P. Ltd.11. He would further submit
that CDSL and Amu cannot seek to escape the consequences of
their conduct in actively aiding transfer of shares from the account
of ABG Securities under the pretext of CDSL not being party to
the proceedings and absence of any specific order being passed
against Amu. Amu was impleaded as a party to the Chamber
Summons in which ad-interim injunction was granted and it had
full knowledge about the same. That Amu still violated the ad-
interim injunction by letting sale of shares in the account of ABG
Securities. That the learned Single Judge, after considering the
material on record, has recorded a finding that Amu is actually a
front for Ashok Bimal Ghosh/his legal heirs. That therefore the act
of sale of shares is done by Amu in connivance with Ashok Bimal
Ghosh/his legal heirs. That to make things worse, the transactions
indicate that Amu has sold the shares to itself. That therefore the
detailed analysis made by the learned Single Judge holding Amu
responsible for siphoning off shares in breach of order of
injunction does not warrant any interference by this Court.
18) Mr. Cama would further submit that the learned Single
Judge, after appreciating the material on record, has arrived at a
finding that both CDSL as well as Amu have knowingly and
willfully acted in breach of an order of injunction passed by this
Court. That the Courts have followed consistent judicial policy of
reversion of status-quo after arriving at a finding that there is
willful breach of order of injunction. That merely because such
11 1990 (Supp) SCC 727
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breach is committed by a third party is not an answer and
technical arguments cannot be permitted to be raised for the
purpose of avoiding consequences arising out of breach of
injunction order. That there was no other way to bring back the
shares siphoned off and therefore the learned Single Judge has
rightly directed maintenance of status-quo ante by making an order
for deposit of amount of Rs.1.79 crores. That though Respondent
Nos.1 to 3 could also have taken out contempt proceedings, the
same would provide no relief to them and that therefore the order
of deposit of money has rightly been made by the learned Single
Judge. That as of now, the direction only envisages bringing the
money to the Court and entitlement of the parties to the same
would ultimately be decided in pending execution proceedings.
That CDSL is otherwise under obligation under its bye-laws to
obey the injunction order. That CDSL’S bye-laws provide for
obligation to recover the monies from depository participants if
there is a breach of injunction order giving rise to liability on the
CDSL.
19) Mr. Cama would then deal with the defence sought to
be raised by CDSL of its inability to search the exact amount of
ABG Securities by taking us through the entire correspondence
between the parties. He would submit that there is an express
admission on the part of CDSL that it was able to search the
relevant accounts of ABG Securities and Ashok Bimal Ghosh on
the basis of their address. That therefore searching of accounts
was easily possible before the shares were transferred. That
therefore CDSL is fully responsible for breach of order of
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injunction passed by this Court as it has willfully failed to comply
with the same.
20) So far as liability of Amu is concerned, Mr. Cama
would submit that it had never set up a case of holding any lien
over the shares of ABG Securities and the said pretext was set up
only at the time of hearing of the Chamber Summons. That an
artificial liability of ABG Securities was created for the purpose of
selling of shares in breach of ad-interim injunction. That Amu has
refused to grant inspection of the relevant records. That the Court
has therefore rightly refused to believe the case of existence of lien.
He would rely on the judgment in Z. Ltd. Versus. A-Z and AA-LL12 in
support of the contention that even a third party breaching
injunction can be held liable. On above broad submissions, Mr.
Cama would pray for dismissal of both the Appeals.
Reasons and Analysis
21) The Appeals are filed under Clause XV of the Letters
Patent challenging the order dated 9 January 2019 passed by
Single Judge of this Court in Chamber Summons filed in
Execution proceedings. Respondent Nos. 1 to 3 have questioned
maintainability of the present appeals on the ground that the
order dated 9 January 2019 is not included in the list of appealable
orders under Section 39 of the Act of 1940. It would therefore be
necessary to first deal with the issue of maintainability of the
present appeals.
12 [1982] 1 Lloyd’s Rep. 240
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Maintainability of Appeals under Clause XV of the Letters
Patent
22) Respondent Nos. 1 to 3 have filed Execution
Application No. 329 of 1997 for execution of the decree made in
pursuance of the award dated 16 January 1997 under provisions of
Section 17 of the Act of 1940.
23) Section 17 of the Act of 1940 provides for
pronouncement of judgment according to the award, and
judgment so pronounced becomes a decree. Section 17 of the Act
of 1940 provides thus:
17. Judgment in terms of award.-
Where the Court sees no cause to remit the award or any of the
matters referred to arbitration for reconsideration or to set aside
the award, the Court shall, after the time for making an
application to set aside the award has expired, or such
application having been made, after refusing it, proceed to
pronounce judgment according to the award, and upon the
judgment so pronounced a decree shall follow and no appeal
shall lie from such decree except on the ground that it is in
excess of, or not otherwise in accordance with, the award.
24) In the present case, after the award was made on 16
January 1997, the same was challenged by Ashok Bimal Ghosh
under Section 30 of the Act of 1940 by filing Arbitration Petition
No. 127 of 1997. On the other hand, Arbitration Petition No. 112 of
1997 was filed by the Claimant under Section 17 of the Act for
pronouncement of judgment. By order dated 29 September 1997,
this Court dismissed Arbitration Petition No. 127 of 1997 filed by
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Ashok Bimal Ghosh and confirmed the award as a decree by
ordering Ashok Bimal Ghosh to pay sum of Rs. 3,58,29,000/- with
interest at the rate of 18% per annum. This is how a judgment was
pronounced in terms of the award dated 16 January 1997, which
became a decree under provisions of Section 17 of the Act of 1940.
25) The Act of 1940 did not contain any specific provision
for enforcement of the arbitral award. Therefore, the decree made
in accordance with provisions of Section 17 of the Act of 1940
became executable before the Execution Court. Respondent Nos. 1
to 3 accordingly filed Execution Application No. 329 of 1997 for
execution of the decree dated 29 September 1997 made under
provisions of Section 17 of the Act of 1940. In that Execution
Application, Chamber Summons No. 534 of 2005 was filed, in
which ad-interim injunction was granted on 6 May 2005 restraining
Respondent Nos. 1, 3 to 6 therein from transferring, selling,
alienating and encumbering inter alia the shares described in
Schedule VIII in the physical and Demat forms with NSDL and
CDSL in the name of Respondent Nos. 1, 3 to 6. Since shares in the
account of ABG Securities were transferred after passing of ad-
interim injunction dated 6 May 2005, Chamber Summons No. 55 of
2009 was filed by Respondent Nos. 1 to 3 seeking a direction either
for bringing back the transferred shares or to deposit in the Court
the value of the transferred shares. The impugned order dated 9
January 2019 has been passed in Chamber Summons No. 55 of
2009.
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26) The issue of maintainability of the present appeals
needs to be decided in the light of controversy as to whether the
impugned order is passed in execution proceedings filed under
the Code or in proceedings filed under the Act of 1940. Resolution
of this controversy is necessary on account of provisions of Section
39 of the Act of 1940, which provides for filing an appeal only
against orders enumerated in that Section. Section 39 of the Act of
1940 provides thus:
39. Appealable orders:
(1) An appeal shall lie from the following orders passed under this Act
(and from no others) to the Court authorised by law to hear appeals
from original decrees of the Court passing the order :-
An order –
(i) superseding an arbitration;
(ii) on an award stated in the form of a special case ;
(iii) modifying or correcting an award;
(iv) filing or refusing to file an arbitration agreement;
(v) staying or refusing to stay legal proceedings where there is
an arbitration agreement;
(vi) setting aside or refusing to set aside an award :
Provided that the provisions of this section shall not apply to any
order passed by a Small Cause Court.
(2) No second appeal shall lie from an order passed in appeal under
this section, but nothing in this section shall affect or take away any
right to appeal to the Supreme Court.
27) According to the Respondent Nos. 1 to 3, the
impugned order dated 9 January 2019 cannot be treated as an
order passed in proceedings initiated under the Code. On the
other hand, it is the contention of the Appellants that the
impugned order has been passed in execution proceedings filed
under Section 47 read with Order XXI of the Court and that______________________________________________________________________________
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maintainable. Before proceeding further, it would be necessary to
observe that at the outset that Respondent Nos. 1 to 3 do not
dispute the position that if the impugned order dated 9 January
2019 is treated to be have been passed under the provisions of the
Code alone, appeal under provisions of Clause XV of the Letters
Patent would be maintainable in view of judgment of the Apex
Court in Shah Babulal Khimji (supra). In that judgment, the Apex
Court has held that every interlocutory order which has the traits
and trappings of ‘finality’ would be appellable under Clause XV of
the Letters Patent, notwithstanding whether such order is
appealable under Order XLIII Rule 1 or not. Qua the issue of
restoration of status quo, the impugned order has the traits and
trapping of ‘finality’ and therefore if the Order is held to have
been passed under the provisions of the Code, the Appeals would
be maintainable. However, since the impugned order is held to
have been passed under the Act of 1940, since the same is not
appealable under Section 39 thereof, the Appeals would become
non-maintainable. In the light of this position, the only issue that
needs resolution is whether the impugned order is passed under
the provisions of the Act of 1940 or under the provisions of the
Code.
28) In support of the contention that the impugned order
has been passed under the provisions of the Act of 1940, reliance is
placed by Respondent Nos. 1 to 3 on provisions of Section 41
thereof which provides thus :-
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41. Procedure and powers of Court:
Subject to the provisions of this Act and of rules made there under –
(a) the provisions of Code of Civil Procedure, 1908 (5 of 1908)
shall apply to all proceedings before the Court, and to all
appeals, under this Act, and
(b) the Court shall have, for the purpose of, and in relation to,
arbitration proceedings, the same power of making orders in
respect of any of the matters set out in the Second Schedule as it
has for the purpose of, and in relation to, any proceedings
before the Court:
Provided that nothing in clause (b) shall be taken to prejudice any
power which may be vested in an arbitrator or umpire for making
orders with respect to any of such matters.
29) Thus, under Section 41 of the Act of 1940, the
provisions of the Code apply to all proceedings before the Court
and to all appeals under the Act. It is therefore contended on
behalf of the award holders that an award made under the
provisions of the Act of 1940 can be enforced by filing proceedings
in accordance with provisions of Section 41 of the Act.
30) As observed above, the Act of 1940 does not contain
any specific provision for enforcement or execution of the award.
The award becomes a judgment and decree under provisions of
Section 17 of the Act of 1940, which then becomes executable. It is
the contention of Respondent Nos. 1 to 3 that the proceedings filed
for execution of decree made in terms of Section 17 of the Act of
1940 is also a proceeding within the meaning of Section 41 of the
Act of 1940.
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31) For deciding the issue at hand, it would also be
necessary to take into consideration the scheme under the Act of
1996, which has replaced the Act of 1940. Under the Act of 1996,
an award made thereunder has an independent character and
status and the same is not required to be converted into a
judgment or decree. This is why the Act of 1996 does not contain
any provision for pronouncement of judgment or making of a
decree by a Court in pursuance of the award, as was the case
under Section 17 of the Act of 1940. On the other hand, the Act of
1996 makes a direct provision for enforcement of the award under
Section 36, which provides thus:
36. Enforcement.–
(1) Where the time for making an application to set aside the arbitral
award under section 34 has expired, then, subject to the provisions of
sub-section (2), such award shall be enforced in accordance with the
provisions of the Code of Civil Procedure, 1908 (5 of 1908), in the same
manner as if it were a decree of the Court.
(2) Where an application to set aside the arbitral award has been filed
in the Court under section 34, the filing of such an application shall not
by itself render that award unenforceable, unless the Court grants an
order of stay of the operation of the said arbitral award in accordance
with the provisions of sub-section (3), on a separate application made
for that purpose.
(3) Upon filing of an application under sub-section (2) for stay of the
operation of the arbitral award, the Court may, subject to such
conditions as it may deem fit, grant stay of the operation of such
award for reasons to be recorded in writing:
Provided that the Court shall, while considering the application for
grant of stay in the case of an arbitral award for payment of money,
have due regard to the provisions for grant of stay of a money decree
under the provisions of the Code of Civil Procedure, 1908 (5 of 1908):
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(a) that the arbitration agreement or contract which is the basis
of the award; or
(b) the making of the award,
was induced or effected by fraud or corruption, it shall stay the award
unconditionally pending disposal of the challenge under section 34 to
the award.
Explanation.- For the removal of doubts it is hereby clarified that the
above proviso shall apply to all Court cases arising out of or in relation
to arbitral proceedings irrespective of whether the arbitral or court
proceedings were commenced prior to or after the commencement of
Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016).
32) Thus, the statutory scheme of 1996 Act is such that an
award made by the Arbitrator can be directly enforced by filing
proceedings under Section 36 of the said Act. Section 36 thus
confers a substantive remedy for the enforcement of an award in
the Act of 1996 at itself.
33) Section 36 of the Act of 1996 creates a deeming fiction
by providing for the enforcement of an award in accordance with
the provisions of the Code, in the same manner as if it were a
decree of the Court. Thus, the award does not become a decree
under Section 36 of the Act of 1996, but is to be merely treated as a
decree for the limited purpose of enforcement in accordance with
provisions of the Code.
34) There is, thus, a marked difference between the
schemes of the Act of 1940 and the Act of 1996 with respect to the
status and character of the award, for its enforcement. An award
becomes a decree under Section 17 of the Act whereas under the
Act of 1996, the award never assumes character of a decree and
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continues to retain its independent character and status as an
award. To paraphrase, under the Act of 1940, an award loses its
character as an award and transforms into a decree upon passing
an order under Section 17 whereas under the Act of 1996, an
award never loses its character or status and continues to remain
as an award, even when it is sought to be enforced under Section
36.
35) This broad distinction between the statutory schemes
of 1940 Act and 1996 Act has been dealt with by a Division Bench
of this Court in Jet Airways (India) Limited (supra) in which the
issue for determination was formulated in paragraph 9 of the
judgment as under:
9. It is necessary to decide whether the impugned order passed
by the Learned Single Judge is an order passed in proceedings
under section 36 of the Arbitration and Conciliation Act, 1996 or
an order passed in proceedings under the Code of Civil
Procedure, 1908. For determining the question about
maintainability of these Appeals in proper perspective, we
deem it fit to note certain relevant provisions of the Arbitration
and Conciliation Act, 1996 (1996 Act), Letters Patent of the High
Court, Bombay, Code of Civil Procedure, 1908, and Arbitration
Act 1940 (the 1940 Act).
36) The Division Bench thereafter formulated further three
core issues in paragraph 15 of the judgment as under:
15. For considering whether the aforesaid submissions deserve
acceptance or not 3 core issues have to be determined namely-
A. Whether the proceedings under section 36 of the 1996 Act are
proceedings under the Code of Civil Procedure, 1908 ?
B. Whether the provisions of clause 15 of the Letters Patent are
applicable to the impugned Judgment and Order and whether
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applicability of clause 15 has been impliedly excluded by
section 37 of the 1996 Act or by the amendment of section 2(2),
47 by Act 104 of 1976 amending the Code?
C. Whether the Judgment of the Supreme Court in the case of
Fuerst Day Lawson (supra) is an authority which is applicable
only in respect of a foreign award covered by Part II of the 1996
Act or whether the ratio of the said Judgment is a binding
precedent even in respect of proceedings under part I of the
1996 Act or the same is obiter dicta?
37) The Division Bench thereafter decided the issue of
nature of proceedings under Section 36 of the Act of 1996 by
comparing the provisions of the Act of 1940 and held as under:
A. Nature of proceedings under section 36 of the 1996 Act.
(a) Section 36 of the 1996 Act uses the words “the award shall be enforced
under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if
it were a Decree of a court.” In fact section 17 of the 1940 Act does not
make an arbitration award a decree of the court even though Chapter
II of the said Act dealt with the arbitration without intervention of a
court. Section 30 of 1940 Act provides for filing a petition for setting
aside an award and in that context section 17 provided that when the
time for filing a petition under section 30 of that Act had expired or
when the petition filed for setting aside the award has been dismissed,
the court shall proceed to pronounce judgment according to the
award, and upon the judgment so pronounced a decree shall fallow.
Thus the 1940 Act clearly provided for a decree being passed by the
Court. There is fundamental difference in the provisions of section 36
of the 1996 Act and section 17 of the 1940 Act only in this regard.
(b) The words “as if it were a decree of the court” used in section 36
have already been interpreted by the Supreme Court in Paramjeet
Singh Patheja vs. ICDS Ltd. MANU/SC/4798/2006 : (2006) 13 SCC
322. In that case, an award under 1996 Act was passed on 26/6/2000
and on the strength of the said award an insolvency notice was issued
under section 9(2) of the Presidency Towns Insolvency Act, 1909.
Section 9(2) of the said 1909 Act provides that a debtor commits an act
of insolvency if a creditor who has obtained a “decree or order” against
him for the payment of money issues him a notice in the prescribed
form to pay the amount and the debtor fails to do so within the time
specified in the notice. This issue was referred to a Division Bench. The
Division Bench answered the reference in the affirmative on 19.03.2003
and held that an award is a “decree” for the purpose of section 9 of the
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Insolvency Act and that an insolvency notice may therefore be issued
on the basis of an award passed by an arbitrator. Against this order
this order the SLP was filed. In this context the observations of the
Supreme Court in paragraph-12 read thus :
“12. The substantial questions of law of paramount important to
be decided by this Court are :
(i) Whether an arbitration award is a “decree” for the purpose of
Section 9 of the Presidency Towns Insolvency Act, 1909?
(ii) Whether an insolvency notice can be issued under Section 9(2) of
the Presidency Towns Insolvency Act, 1909 on the basis of an
arbitration award ?
The conclusions can be seen in paragraphs 21, 23, 28, 29, 42 and
43 which read thus :
21. The words ‘Court’, ‘adjudication’ and ‘suit’ conclusively
show that only a Court can pass a decree and that too only in
suit commenced by a plaint and after adjudication of a dispute
by a judgment pronounced by the Court. It is obvious that an
arbitrator is not a Court, an arbitration is not an adjudication
and, therefore, an award is not a decree.
23. The words ‘decision’ and ‘Civil Court’ unambiguously rule
out an award by arbitrators.
28. It is settled by decisions of this Court that the words ‘as if’ in
fact show the distinction between two things and such words
are used for a limited purpose. They further show that a legal
fiction must be limited to the purpose for which it was created.
42. The words “as if” demonstrate that award and decree or
order are two different things. The legal fiction created is for the
limited purpose of enforcement as a decree. The fiction is not
intended to make it a decree for all purposes under all statutes,
whether State or Central.
43. For the foregoing discussions we hold :
i) That no insolvency notice can be issued under Section 9(2) of
the Presidency Towns Insolvency Act, 1909 on the basis of an
Arbitration Award;
ii) That execution proceedings in respect of the award cannot be
proceeded with in view of the statutory stay under Section 22 of
the SICA Act. As such, no insolvency notice is liable to be issued
against the appellant.
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iii) Insolvency Notice cannot be issued on an Arbitration
Award.
iv) An arbitration award is neither a decree nor an Order for
payment within the meaning of Section 9(2). The expression
“decree” in the Court Fees Act, 1870 is liable to be construed
with reference to its definition in the CPC and held that there
are essential conditions for a “decree”.
(a) that the adjudication must be given in a suit.
(b) That the suit must start with a plaint and culminate in a
decree, and
(c) That the adjudication must be formal and final and must be
given by a civil or revenue court.
An award does not satisfy any of the requirements of a decree.
It is not rendered in a suit nor is an arbitral proceeding
commenced by the institution of a plaint.
(v) A legal fiction ought not to be extended beyond its
legitimate field. As such, an award rendered under the
provisions of the Arbitration Act, 1996 cannot be construed to
be a “decree” for the purpose of Section 9(2) of the Insolvency
Act.
(vi) An insolvency notice should be in strict compliance with the
requirements in Section 9(3) and the Rules made thereunder.
(vii) It is a well-established rule that a provision must be
construed in a manner which would give effect to its purpose
and to cure the mischief in the light of which it was enacted. The
object of Section 22, in protecting guarantors from legal
proceedings pending a reference to BIFR of the principal debtor,
is to ensure that a scheme for rehabilitation would not be
defeated by isolated proceedings adopted against the
guarantors of a sick company. To achieve that purpose, it is
imperative that the expression “suit” in Section 22 be given its
plain meaning, namely any proceedings adopted for realization
of a right vested in a party by law. This would clearly include
arbitration proceedings.
(viii) In any event, award which is incapable of execution and
cannot form the basis of an insolvency notice.
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16. Apart from the above binding precedent even on an independent
consideration of the provisions of the 1940 Act and 1996 Act, the
conclusion is inevitable that proceedings under 36 are not proceedings
under the Code. As noted above, the Arbitration Act 1940 (10 of 1940)
amended section 104 of the Code and sub clause (a) to (f) of sub-
section 1 of section 104 of the Code, which all dealt with arbitration
proceedings, were deleted. The legislative intent was thus very clear
that the Code will not deal with any matter in relation to the
arbitration and precisely for this reason the legislative intent would be
clear namely that the arbitration proceedings and all proceedings
arising therefrom will be governed only by the Arbitration Act, 1940
which has been repealed and replaced by 1996 Act. The Supreme
Court has already interpreted the words “as if it was a decree of the
court” which clearly shows that only the procedure for enforcement of
a decree passed by the Civil Court is to be utilised for enforcement of
an award and, merely on that ground, the said proceedings do not
become proceedings under the Code. In our opinion, they continue to
be proceedings under the 1996 Act. In fact section 19 of the 1996 Act
also makes it clear that the provisions of the Code do not apply to the
arbitration proceedings. This is a departure from the 1940 Act in as
much as under section 41 of the said Act it was provided that subject
to the provisions of 1940 Act the provisions of the Code shall apply to
all proceedings before the Court under that Act and to all appeals
under that Act. Such a provision is completely absent in the 1996 Act
and this is one more indication that the proceedings under 1996 Act
even for implementation of award cannot be considered to be
proceedings under the Code. Even section 41 of the 1940 Act has been
construed by the Supreme Court in the case of Union of India vs.
Mohinder Supply Company (supra) and State of West Bengal vs.
Gauranglal Chaterji (supra) & it is held that the said provision is
subject to the limitation contained in section 39 of the 1940 Act. For all
the aforesaid reasons, we have no hesitation in holding that nature of
proceedings before the learned Single Judge were proceedings under
the 1996 Act and not proceedings under the Code.
CONCLUSION RE-POINT NO. 1
19. In view of the aforesaid clear and binding pronouncement of law it
has to be held that the proceedings initiated by the appellants and the
respondents before the learned Single Judge were proceedings under
section 36 of the 1996 Act and cannot be held to be proceedings of
execution under section 47 or order 21 of the Code of Civil Procedure,
1908.
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28. In our opinion, since we have reached a conclusion that the
proceedings under section 36 of the 1996 Act are not proceedings
under the Code, this issue really becomes academic. However, if our
first conclusion on point No. 1 were that the proceedings under section
36 are proceedings under the Code of Civil Procedure, 1908; then
considering the nature of proceedings and adjudication done by the
learned Single Judge which is a subject matter of the present appeals,
would certainly be a “judgment” under clause 15 of the Letters Patent
of High Court, Bombay. In that eventuality, present appeals would
have been maintainable since the proceedings before the Ld. Single
Judge were original proceedings and as held by the Constitution Bench
majority view in P.S.Sathappan (Supra), since there is no express bar
u/s. 104(1) of the Code or in section 100A as amended following the
ratio in the case of P.S. Sathappan (Supra) and the Judgment of this
Court in Laxman Bala Surve (Supra) and of the Supreme Court in Shah
Babulal Khimji (supra), it would have been required to be held that
appeals were maintainable. However, in view of our conclusion on
Point No. 1 and Point No. 2(a) recorded above, as we have held that
the proceedings before the Ld. Single Judge were proceedings under
the Special Law i.e. 1996 Act, our ultimate conclusion about
maintainability does not change.
(emphasis added)
38) The Division Bench, upon comparing the provisions of
Section 36 of the Act of 1996 and Section 17 of the Act of 1940, held
that the Act of 1940 clearly provided for a decree being passed by
the Court, which is not the case under the provisions of the Act of
1996. This Court further concluded that the proceedings under
Section 36 of the Act of 1996 cannot be treated as proceedings
under the Code, but there is a fundamental difference in the
provisions of the Act of 1940, which provided for passing of a
decree by the Court on an award. Therefore, in Jet Airways (India)
Limited, this Court held that proceedings initiated for enforcement
of an award under Section 36 of the Act of 1996 cannot be treated
as proceedings for execution under Section 47 or Order XXI of the
Code.
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39) Both the sides have relied on judgment in Jet Airways
(India) Limited in support of their respective pleas for treating the
execution proceedings as filed under the Code or under the Act of
1940. The Division Bench in Jet Airways (India) Limited, though has
made reference to the provisions of the Act of 1940, the issue
before it was not about maintainability of appeal against order
passed in execution proceedings filed for execution of award
made under the Act of 1940. The Division Bench has decided only
the issue of nature of proceedings filed for execution of award
under Section 36 of the Act of 1996 and has held that the same
cannot be treated as the proceedings filed under the Code.
However, since a comparative analysis of the two Acts is made by
the Division Bench, both the sides have placed reliance on the
judgment. Mr. Cama has particularly relied on observations in
Para 16 of the judgment where the Division Bench has discussed
the departure made by the Act of 1996 about non-applicability of
provisions of the Code under Section 9 thereof as against
applicability of the provisions of the Code under Section 41 of the
Act of 1940. Then it is sought to be contended that Section 41 of
the Act of 1940 has been construed by the Supreme Court in the
case of Union of India vs. Mohinder Supply Company (supra) and that
it is held that the said provision is subject to the limitation
contained in section 39 of the 1940 Act. In our view however, the
above findings do not assist the case that Mr. Cama seeks to
canvass. Undoubtedly the provisions of the Code applied to the
arbitral proceedings under the Act of 1940, but they applied only
till the award is converted into a decree. Once the decree is made
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under Section 17 of the Act of 1940, the provisions of that Act no
longer apply, and the proceedings get transferred out of sphere of
that Act. This is discussed in greater detail in the latter part of the
judgment.
40) On the other hand, Mr. Dhond has relied on the
observations in Jet Airways (India) Limited holding that the Act of
1940 clearly provided for a decree being passed by the Court and
that there is fundamental difference in the provisions of section 36
of the 1996 Act and section 17 of the 1940 Act only in this regard.
In our view, for deciding the issue at hand, the judgment in Jet
Airways (India) Limited can only be used for recognition of
fundamental difference between the scheme of the two
enactments where conversion of award into a decree for being put
in execution was provided under the Act of 1940 as opposed to
enforcement of the award itself (without any provision for
conversion into a decree) under the Act of 1940.
41) As observed above, the Act of 1940, after making a
provision for conversion of an award into a decree, did not
contain any other provision, under which such decree is to be
executed. Therefore, a party seeking enforcement of an award
made under the Act of 1940 had no option but to first apply for
pronouncement of a judgment under Section 17 and for decree in
terms of the said judgment and thereafter apply for execution of
the decree. The award holder could not file proceedings under
Section 41 for enforcement of award. The award was
unenforceable unless converted into a judgment and decree. Once
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a decree is made under Section 17, no further remedy is provided
within the framework of the Act of 1940 and the decree holder had
no option but to initiate proceedings under Section 47 read with
Order XXI of the Code. As against this, an award holder can file
proceedings for enforcement of award by exercising remedy
under the 1996 Act itself and it is not necessary for the award
holder to scout for remedy outside the said Act. Therefore, the
proceedings initiated for execution of a decree made under Section
17 of the Act of 1940 will have to be treated as proceedings
initiated under Section 47 read with Order XXI of the Code.
42) Provisions of Section 41 of the Act of 1940 make
provisions of the Code applicable to all proceedings before a
Court. The true purport of Section 41 is to govern the procedure
applicable to proceedings filed under the Act before a Court.
Therefore, till the proceedings remain within the ambit of the Act
of 1940, Section 41 would control the procedure of those
proceedings by applying the provisions of the Code thereto.
However, provisions of Section 41 cannot be used in a reverse
manner to bring back proceedings filed under the Code within the
sphere of the Act of 1940.
43) Therefore, mere application of provisions of the Code
to proceedings before the Court under Section 41 of the Act of
1940 would not convert the execution proceedings initiated under
the Code as the proceedings filed under the Act of 1940. Section 41
would have application only to all proceedings before the Court
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up to making of an order under Section 17 of the Act of 1940. Once
an order under Section 17 is made, the proceedings would
terminate under the Act of 1940. The remedy for execution of the
decree will necessarily have to be traced under Section 47 read
with Order XXI of the Code on account of absence of any
provision in the Act 1940. Section 41 is not a standalone provision
empowering the Executing Court to enforce an award unlike the
provisions of Section 36 of the Act of 1996. Therefore, provisions
of Section 41 of the Act of 1940 cannot be relied upon for the
purpose of deciding the nature of proceedings filed for execution
of a decree made under Section 17 as proceedings filed under the
Act of 1940.
44) The position that Section 36 of the Act of 1996 creates a
mere fiction and the Award passed under the Act of 1996 is not a
decree of a Court is emphasized by the Apex Court in Sundaram
Finance Ltd. (supra). The issue before the Apex Court was about
jurisdiction of the Court enforcing Award under Section 36 of the
1996 Act. In case before the Apex Court, the Executing Court had
returned the execution application on the ground of lack of
jurisdiction directing the Appellant to obtain transfer of the decree
from the Court in Tamil Nadu and then apply for execution of the
decree in the Trial Court at Morena. There was divergence of
legal opinions by different High Courts on the issue as to whether
the Award under the Act of 1996 is required to be first filed in the
Court having jurisdiction over arbitration proceedings for
execution and then to obtain transfer of decree or whether an
Award can straightaway be filed and executed in the Court where
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the assets are located. In view of divergence of views, direct
Appeal was filed before the Apex Court. The Apex Court held that
enforcement of an Award through its execution can be sought
anywhere in the country where the same can be executed and that
there is no requirement for obtaining a transfer of the decree from
the Court which has jurisdiction over the arbitration proceedings.
While answering the above issue, the Apex Court made following
observations in paras-14 and 19 :
14. We would now like to refer to the provisions of the said
Act, more specifically Section 36(1), which deals with the
enforcement of the award:
“36. Enforcement. – (1) Where the time for making an
application to set aside the arbitral award under
section 34 has expired, then, subject to the provisions
of sub-section (2), such award shall be enforced in
accordance with the provisions of the Code of Civil
Procedure, 1908 (5 to 1908), in the same manner as if it
were a decree of the court.”
The aforesaid provision would show that an award is to be
enforced in accordance with the provisions of the said code in
the same manner as if it were a decree. It is, thus, the
enforcement mechanism, which is akin to the enforcement of a
decree but the award itself is not a decree of the civil court as
no decree whatsoever is passed by the civil court. It is the
arbitral tribunal, which renders an award and the tribunal does
not have the power of execution of a decree. For the purposes
of execution of a decree the award is to be enforced in the same
manner as if it was a decree under the said Code.
19. The Madras High Court in Kotak Mahindra Bank Ltd. v.
Sivakama Sundari, 2011 SCC Online Mad 1290 referred to
Section 46 of the said Code, which spoke of precepts but
stopped at that. In the context of the Code, thus, the view
adopted is that the decree of a civil court is liable to be
executed primarily by the Court, which passes the decree
where an execution application has to be filed at the first
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instance. An award under Section 36 of the said Act, is equated
to a decree of the Court for the purposes of execution and only
for that purpose. Thus, it was rightly observed that while an
award passed by the arbitral tribunal is deemed to be a decree
under Section 36 of the said Act, there was no deeming fiction
anywhere to hold that the Court within whose jurisdiction the
arbitral award was passed should be taken to be the Court,
which passed the decree. The said Act actually transcends all
territorial barriers.
Thus, the Apex Court, after noticing the provisions of Section 36 of
the Act of 1996 has held that Section 36 only creates enforcement
mechanism which is akin to enforcement of a decree, but the
Award itself is not a decree of Civil Court. It has further held that
Award under Section 36 of the Act is equated to a decree of the
Court for the purposes of execution and only for that purpose. It is
otherwise not a decree for any other purposes. The Apex Court
recognised the principle that Section 36 creates a legal fiction by
providing for enforcement of award as if it is a decree.
45) Mr. Cama has strenuously relied on the judgment in
Union of India Versus. Aradhana Trading Co. (supra), in which the
issue before the Apex Court was about the maintainability of an
appeal under Section 39 of the Act of 1940, against an order made
by the Court under Order IX Rule 13 of the Code, refusing to recall
an ex-parte order passed under Section 17 of the Act of 1940. In that
case, after making of an award, the same was filed by the
Arbitrator before the Calcutta High Court, which issued notices to
the Appellants. Appellants failed to file any objections against the
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award. In absence of appearance on behalf of the Appellants, the
High Court passed a decree in terms of award under Section 17,
making the same rule of the Court. Appellant thereafter moved an
application for recall of an order passed under Section 17 to
explain its absence. The said application was filed under
provisions of Order IX Rule 13 of the Code which was dismissed
by the learned Single Judge of the High Court. Against that order,
appeal was preferred before the Division Bench under provisions
of Section 39 of the Act of 1940. The appeal was dismissed by the
Division Bench as not maintainable. In the light of this position,
the issue before the Apex Court was whether an appeal against
order passed by a Single Judge refusing to set aside ex-parte order
under Order IX Rule 13 of the Code was appealable under Section
39 of the Act of 1940. The Apex Court referred to its decision in
Union of India Versus. Mohindra Supply Co. (supra) and held as
under:
9. …. In Union of India Vs Mohindra Supply Company
MANU/SC/0004/1961 : [1962]3SCR497 : [1962]3SCR497 , a decision
by a Bench of Four Judges, held that Section 39 applies to the appeals
to superior courts as well as to intra-court against the decree passed in
terms of the award but against the order passed in appeal, a Letters
Patent Appeal was held to be barred under sub-section (2) of Section
39 of the Arbitration Act according to which no second appeal lies
against an order passed under Section 39(1) of the Act. It was further
held that in view of the said provision, appeal under Section 100 CPC
was also prohibited. We, however, find that so far as this case is
concerned, it stands on a different footing since in the present case it is
not a further appeal or a second appeal but an appeal against an order
passed by the learned Single Judge under Order IX Rule 13 CPC. It
would however be relevant for the purpose that restriction on appeal
under Section 39 of Arbitration Act shall be applicable to appeals
under any provision of law, may be CPC or Letters Patent.
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13. The question which thus remains to be considered is as to whether
an order passed on an application making the prayer like one which
could be referable to Order IX, Rule 13 CPC would be appealable or
not. Such an application could be made by virtue of Section 41 of the
Arbitration Act. An order under Order IX, Rule 13 CPC is appealable
under Order 43, clause (c) read with Section 104 CPC. In the case of
National Sewing Thread Co. Ltd. (supra), a decision by a Bench of
Three Hon’ble Judges, the matter related to Trade Marks Act Section
76(1) of which provided for an appeal against a decision of the
Registrar under the Act to the High Court but no further provision in
regard to the procedure to be applied was made. An appeal against the
order of the Registrar was decided by a learned Single Judge of the
High Court against which a Letters Patent Appeal was filed which was
held to be maintainable even though no such provision of further
appeal was made under the Trade Marks Act. As indicated earlier the
Court in the above-noted case has relied upon certain decision and
held as follows:
“Though the facts of the cases laying down the above rule were
not exactly similar to the facts of the present case, the principle
enunciated therein is one of general application and has an
apposite application to the facts and circumstances of the
present case. Section 76 the Trade Marks Act confers a right of
appeal to the High Court and says nothing more about it. That
being so, the High Court being seized at such of the appellate
jurisdiction conferred by section 76 it has to exercise jurisdiction
in the same manner as it exercises its other appellate jurisdiction
and when such jurisdiction is exercised by a Single Judge, his
judgment becomes subject to appeal under clause 15 of the
Letters Patent there being nothing to the contrary in the Trade
Marks Act.”
In view of what has been held above a Court while exercising power
by virtue of Section 41 of the Arbitration Act shall have all other
related powers of the ordinary civil court subject to the constraints
contained in the special Act itself. Normally, an appeal would be
maintainable but there are two constrains as provided under the
Special Act, namely, it should not be a second appeal as provided
under sub-section (2) of Section 39 of the Act which position is also
clear in the case of Mohindra Supply Company (supra) where it was
held that the second appeal under Section 100 CPC or under the
Letters Patent against an appellate order was barred by virtue of sub-
section (2) of Section 39. Here we find that there is yet another
constraint as provided under sub- section (1) of Section 39 of the
Arbitration Act itself and it is emphatic too when it says that appeal
shall lie against the orders indicated in the provision and from no
other order. Section 41 of the Arbitration Act makes the provisions of
CPC applicable subject to the provisions of the Arbitration Act and the
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rules framed thereunder. Therefore, the nature of an order against
which an appeal may lie must conform to the nature of the order as
enumerated under sub-section (1) of Section 39 of the Arbitration Act.
If it does not amount to such an order as enumerated under sub-
section (1) of Section 39, the prohibition as contained in this sub-
section “(against no other order”) itself, would become operative,
subject to which alone provisions of CPC apply under Section 41 of the
Act. In the facts of the present case we find that an order refusing to
recall an order passed by the court will not amount to refusal to set
aside the award under clause (vi) of sub-section (1) of Section 39 of the
Arbitration Act as no objections to set aside the award have ever been
filed with or without application for condonation of delay, challenging
the award. Admittedly, the appellant did not file any appeal against
the order dated 27.1.1998. In these circumstances and in view of the
provisions of the Arbitration Act, the decision in the case of National
Sewing Thread Co. Ltd. (supra) shall also not be applicable as in the
Trade Marks Act with which the court was dealing, did not have any
provision like the one contained in sub- section (1) of Section 39 of the
Arbitration Act restricting the right of appeal only in respect of certain
nature of orders and prohibiting appeal against any other order
whatsoever. Therefore, in the case of National Sewing Thread Co. Ltd.
(supra) it was held that where a provision for appeal was made under
Section 76(1) of the Trade Marks Act to the High Court, with nothing
more, the other provisions relating to exercise of that jurisdiction by
the High Court would be applicable. The case of National Sewing
Thread Co. Ltd. (supra) is thus based on different provisions and is
clearly distinguishable. The case in hand is covered by the decisions in
the cases of Neeilkantha (supra) and Mohindra Supply Co. both
decided by Bench of four Judges which do not seem to have been
noticed in other judgments.
46) In our view, the judgment of the Apex Court in
Aradhana Trading Co. offers little assistance to the issue involved in
the present case. The issue before the Apex Court was about
maintainability of an appeal under Section 39 of the Act of 1940,
against an order passed in application seeking recall of an ex-parte
decree. Thus, what was sought by the Appellant was recall of an
order made under Section 17 of the Act of 1940. In that sense, the
proceedings had not traveled beyond the scope of the Act of 1940
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and remained within its sphere. If the learned Single Judge was to
allow the application for recall of the ex-parte order, proceedings
under Section 17 of the Act would have revived. Thus, the
application filed by the appellants was for revival of proceedings
under Section 17 of the Act and therefore even though provisions
of Order IX Rule 13 of the Code were sought to be invoked, the
order made in that application still remained within the purview
of proceedings under the Act of 1940. Since the said order was not
appealable under Section 39 of the Act, the appeal was held to be
not maintainable. In the present case, an application filed by
Respondent Nos. 1 to 3 is after the Section 17 stage is crossed and
the proceedings have traveled outside the scope of the Act of 1940.
In our view, therefore, the judgment of the Apex Court in
Aradhana Trading Co. would have no application to the issue
involved at hand.
47) Mr. Cama has contended that the Act of 1940 is a
complete code in itself and that therefore every order made
relating to an award including execution proceedings, would be
proceeded under the Act of 1940 and not under the provisions of
the Code. Reliance is placed on the judgment of the Apex Court in
Union of India Versus. Mohindra Supply Co. (supra) in which it is held
as under:
The Arbitration Act which is consolidating and amending act, being
substantially in the form of a quote relating to arbitration must be
construed without any assumption that it was not intended to alter
the law relating to appeals.
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48) The above observations are made in the light of facts of
the case in which a Second Appeal was sought to be filed against
order passed by a Single Judge of the High Court under
provisions of Section 39 of the Act of 1940, dismissing an appeal
challenging the order of the Subordinate Judge, First Class, Delhi,
refusing to set aside the award. The issue before the Apex Court
was whether a Second Appeal was maintainable under the Act of
1940 against an order made under Section 39 of the Act. It is in the
light of this issue that the above quoted observations are made.
The judgment in Mohindra Supply Co. therefore does not provide
any assistance for deciding the issue at hand.
49) Mr. Cama has also relied upon the judgment of the
Apex Court in Fuerst Day Lawson Limited (supra) in which it is held
that an order which is not appealable under the Act of 1996 are not
open to Letters Patent Appeal. There can be no debate about this
position that if the impugned order was to be passed in
proceedings under the Act of 1940 and was not appealable under
Section 39, the present appeals would not have been made
maintainable under Clause XV of the Letters Patent. However,
since the impugned order is passed in proceedings filed under the
provisions of the Code, the appeals would be maintainable under
Clause XV of the Letters Patent.
50) Reliance is placed by Mr. Cama on the judgment of
Delhi High Court in Union of India Versus. N. K. Pvt. Ltd. (supra) in
which again the issue involved was about maintainability of an
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appeal under the Letters Patent against an order passed in
proceedings under the Act of 1940, which otherwise are not
appealable under Section 39 of the Act. The judgment therefore
provides no assistance for deciding the issue at hand.
51) The conspectus of the above discussion is that the
proceedings for execution of a decree made under Section 17 of
the Act of 1940 are traceable to the provisions of Section 47 read
with Order XXI of the Code and the same are not proceedings
under the Act of 1940. Thus, any order passed in those
proceedings would be an order made under the Code. Therefore,
provisions of Section 39 of the Act of 1940 would not be applicable
to such an order. If the order passed in proceedings filed under
the Code have the traits and trappings of finality an appeal under
provisions of Clause XV of Letters Patent would lie before a
Division Bench of this Court.
52) Since the impugned order dated 9 January 2019 has
been passed in proceedings filed for execution of a decree made
under Section 17 of the Act of 1940, the same will have to be
treated as an order passed in proceedings filed under the Code. As
the said order has the traits and trappings of final adjudication on
the Appellants’ liability to restore status quo, the present appeals
filed under Clause XV of the Letters Patent are held to be
maintainable.
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Merits of the Appeals
53) Appellant-CDSL, has contended that it has never been
a party to any of the proceedings initiated either by the original
claimant or by his legal heirs. There is no dispute to the position
that CDSL was not a party to the arbitral proceedings. It is not
impleaded as a party even in Execution Application No. 329 of
1997. It is not the case of Respondent Nos. 1 to 3 that the decree
made in terms of the arbitral award is executable against CDSL.
CDSL was not even impleaded in Chamber Summons No. 534 of
2005, in which an order of ad-interim injunction dated 6 May 2005
was passed. CDSL was impleaded for the first time by Respondent
Nos. 1 to 3 in Chamber Summons No. 55 of 2009. On the other
hand, Amu was impleaded as a Respondent in Chamber
Summons No. 534 of 2005.
54) It would be necessary to refer to the ad-interim
injunction order passed by the learned Single Judge on 6 May 2005
in Chamber Summons No. 534 of 2005. The order reads thus :-
Put up for further orders on 13th June,2005. Ad-interim order in
terms of prayer clause (h). It is clarified that so far as Schedule
VI is concerned, this order operates only in relation to the
accounts at Item nos.3, 4 and 5 of Schedule VI. It is further
clarified that this order does not extend to the d-mat account of
Respondent no.2 mentioned in Schedule VIII.
Ad-interim order in terms of prayer clause (j).
55) Prayer Clauses (h) and (j) of Chamber Summons No.
534 of 2005 were as under:-
(h) that Respondent Nos. 1, 3 to 6 are their servants,
agents/aliases be directed by an Order and injunction of this
Hon’ble Court restraining them from transferring, selling,
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to 6 or from Creating any third party rights in any of the
properties and assets of Respondent Nos. 1 to 6 including those
shown in Schedule IV to VIII hereto;
(j) that Respondent Nos. 1 be directed by an Order and
injunction of this Hon’ble Court restraining him from
transferring, selling, alienating, encumbering or creating any
third party rights in Respondent No.1’s flat No.105 “C” Wing,
Jhaveri Complex Co-op Housing Society Ltd, 123/124 Bhabhola
Chulna Road, Vasai (W), Dist. Thane, Maharashtra;
56) Schedule No. VI to the Chamber Summons was as
under :-
SCHEDULE – VI
HDFC Bank Ltd.
Fort Branch,
Manekji Wadia Bldg.,
Nanik Motwani Marg,
Mumbai 400 001.
Sr. Account Name Account No. Recent Authorised Account Customer
No Balance Signatories Opening ID
. (10.01.2005 Date
to
15.01.2005)
(Rs.)
1. Lily A. Ghosh 0601330009355 .00 1. Lily A.
Ghosh
2. Ashok B.
Ghosh
2. Lily A. Ghosh 0601330014759 4,051.92 1. Lily A. 24.03.2003 4075865
Ghosh
2. Ashok B.
Ghosh
3. Ashok B. Ghosh 0601000156019 .00 1. Lily A. 3755619
Ghosh
2. Ashok B.
Ghosh
4. LANS 0602000026744 10,000.00 1. Ashok B. 21.02.2004 5538638
Communication Ghosh
(sole
proprietorship
of Ashok B.
Ghosh)
5. ABG Securities 0600340013566 1,30,699.82 (Company
Pvt. Limited formed on
12.02.2004)
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57) Thus, order dated 6 May 2005 restrained Ashok Bimal
Ghosh, ABG Securities, Lans Communication, Ashok Film and
Finance and Lily Agro Products (Respondent Nos. 1 and 3 to 6) in
Chamber Summons No. 534 of 2005 from transferring, selling,
alienating or encumbering the shares in the accounts reflected in
Schedule VI. Item 5 of the Schedule VI was in respect of the Demat
Account of ABG Securities. Amu was impleaded as Respondent
No. 9 to Chamber Summons No. 534 of 2005, however, the ad-
interim injunction dated 6 May 2005 did not apply to Amu. In
breach of the injunction order dated 6 May 2005, it appears that
the shares in the Demat Account of ABG Securities were
transferred. It is on this basis that Respondent Nos. 1 to 3 have
alleged violation of the injunction and accordingly filed Chamber
Summons No. 55 of 2009. In that Chamber Summons, prayer
clauses (a) and (f)(i) read thus:
(a) That Respondent Nos. 1 and 7 or such of them as this
Hon’ble Court holds liable be ordered and directed to
(i) deposit with Mr. Amol V Doijode, Receiver, within a period
of four weeks, in his Demat Account, DPID No. IN300685 Client
ID 10536714, all the shares transferred out of the Demat Account
of Respondent No. 9, DPID 12016200, Client ID 00000785, after
the passing of the Injunction Order on May 6, 2005 in Ch/s.
534/2005 Particulars whereof are at Schedule “V”hereto
together with all the benefits thereon interalia, bonus shares,
split shares, rights shares, dividends etc., issued by the
Companies after the date of transfer;
OR
(ii) in the alternate to (a)(i) above, handover to Mr. Amol V.
Doijode, Receiver within a period of four weeks, the monetary
value of the said shares which were transferred after the passing
of the Injunction Order on May 6, 2005 in Ch/s. 534/2005, Rs.
470,25,060.12, along with interest thereon @ 18% p.a. from
September 20, 2007, till payment or realization as per the
particulars of the claim shown in Schedule “VI” hereto;
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(f) Respondent No. 7 be directed to :
(i) transfer and deposit with Mr. Amol V Doijode, Receiver, in
his Demat Account, DPID No IN300685, Client ID 10536714,
within a period of two weeks, all the shares lying in the demat
account of Late Ashok Bimal Ghosh being DPID 12016200 Client
ID 00000504, as of May 6, 2005, together with all the benefits
thereon, interalia, bonus shares and split shares, issued by the
Companies thereon;
58) The learned Single Judge in the impugned order dated
9 January 2019 has held both CDSL as well as Amu responsible for
the breach of the order of ad-interim injunction and has
accordingly made Chamber Summons No. 55 of 2009 absolute in
terms of prayer clause (a)(ii) for the amount of Rs. 1,79,62,131.56/-
as well as in terms of prayer clause f(i). Both CDSL as well as Amu
have challenged the order dated 9 January 2019 contending that
they were neither bound by the order of ad-interim injunction nor
have they violated the same and that therefore the learned Single
Judge could not have made an order directing them to bring to the
Court an amount of Rs. 1,79,62,131.56/-.
59) We first proceed to examine the challenge raised by the
CDSL to the impugned order dated 9 January 2019.
CDSL’s Appeal No.104 of 2019
60) CDSL is one of the two depositories in India, the other
being National Securities Depository Limited (NSDL). CDSL
claims that it has 581 Depository Participants, which include
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several banks. According to CDSL, there are 16.11 crore Demat
account holders for 581 Depository Participants. CDSL, thus sits at
the top of the pyramid, whose base is in excess of 16 crore Demat
accounts.
61) As observed above, CDSL has never been a party to
any of the proceedings up to filing of Chamber Summons No. 55
of 2009. The decree made in pursuance to the arbitral award is
neither binding nor executable against CDSL. CDSL is a complete
stranger to the transaction between the contesting parties and has
been drawn in the proceedings on account of allegation of breach
of order of ad-interim injunction dated 6 May 2005 by transfer of
shares from the Demat account of ABG Securities. Respondent
Nos. 1 to 3 believe that CDSL has participated in breach of ad-
interim injunction dated 6 May 2005, which is a reason why it was
sought to be made liable for bringing back the amount of Rs.
1,79,62,131.56/-. CDSL had raised following submissions before
the learned Single Judge, which are captured in paragraph 26 of
the impugned order:
26. Mr. Purohit submitted that:
(A) Applicants are seeking to execute the decree against CDSL;
(B) Section 47 of the Code of Civil Procedure, 1908 (CPC)
governs the application, and cannot apply to CDSL;
(C) Order XXI of CPC only provides for payment in three
situations none of which is contemplated in the present
chamber summons, and there is no provision in CPC for passing
an order against CDSL to restore the status quo ante;
(D) CDSL could not freeze the account of ABG as there was no
specific order against CDSL; the injunction was in personam
against Ghosh, Lily and ABG;
(E) There is no obligation on CDSL, in law, to freeze the account;
CDSL may choose to do so but it is their entitlement entirely;
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(F) CDSL could not locate the account of ABG in its system as it
was written as “ABG Securities Pvt. Ltd.” and in their system it
was recorded as “ABG Securities Private Limited”;
(G) CDSL is an innocent third party and the present Application
effectively seeks damages against CDSL which cannot be done
by way of the present proceedings.
62) The learned Single Judge has, however, rejected
CDSL’s contention that it is impermissible to execute the decree
against CDSL and that in absence of a provision in the Code, to
make an order against CDSL to restore status quo ante by invoking
the inherent power under Section 151 of the Code. The learned
Single Judge has held that the Court has inherent powers under
Section 151 of the Code to restore things to the former condition if
a party has acted in breach of an injunction. The learned Single
Judge relied upon the judgments in Municipal Corporation, Shirdi
Versus. Sau. Sonia Devidas Patil13 and Vidya Charan Shukla Versus.
Tamil Nadu Olympic Association14 and held in paragraph Nos. 28, 29,
30 and 31 as under:
28 These contentions of Shri Purohit in my view are misconceived as
applicants are not seeking, by prayer clause (a), to execute the decree
against CDSL or to ask CDSL to pay money to applicants. Applicants
are simply seeking an order from this Court that the transfers having
been permitted to be done by CDSL in breach of the orders of the
Court and in violation of the statutory provisions, Byelaws and
Agreement between CDSL and Amu having statutory force, this
Court, in exercise of its inherent powers, as per the law laid down in
the various judgments referred to and relied upon by Shri Cama,
ought to undo the wrong and restore the parties to the position that
they were prior to the order of injunction.
Applicants are not seeking any orders of execution of the decree
against CDSL but are simply seeking consequential orders to bring
back the shares sold/transferred in breach of the said order and
13 2009 (2) ALL MR 847
14 AIR 1991 Mad 323 (Full Bench)
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thereby restore the parties to the position they were in, prior to the
transfers being done in breach of said order.
29 The entire contention of Shri Purohit that Section 47 of CPC governs
the application and cannot apply to CSDL proceeds on the incorrect
basis that the order seeking restoration of the status quo ante falls
under Section 47 of CPC. As held in various judgments as referred
earlier, this Court has an inherent power, regardless of any other
provisions in law, to restore things to their former condition if a party
has acted in breach of an injunction. This is both under Section 151 of
CPC and also as a matter of judicial policy. A party may not even take
out a Contempt Petition or resort to any other provision of law; the
Court which passed the order ought to simply exercise its inherent
power to ensure that its order is not stultified or set at naught.
Judgments referred to above and particularly those of Municipal
Council Shirdi (Supra) and Vidhya Charan Shukla (Supra) clarify the
above position.
Paragraph 12 of the Municipal Council Shirdi (Supra) reads as under :
12. The pleading of the party has to be considered and understood in
its proper perspective. This Court and Supreme Court has held that
mofussil pleading has to be construed liberally. Para 6 (B) of the
prayer clause specifically makes a prayer that if defendants no.1 to 3
succeed in carrying out the construction of the road legally, in that
circumstances said work (construction of the road) and said action
should be removed and plaintiff be permitted to enjoy the property
peacefully. This pleading is in vernacular. I read the plaint from para
(1) till last prayer in para 6(C). If the plaint as a whole is read and
appreciated, in my view, adequate and sufficient pleading is made by
the plaintiff seeking mandatory injunction and/or direction. In the case
in hand, both the Courts are concurrent on the point that temporary
injunction was issued by the Court. The Courts have referred to
various dates right from the date of filing of the suit and even couple
of months before it. The Courts have referred the report of the
Commissioner. The Courts have also appreciated the short span of
time within which the defendant no.2 could complete the construction
work of the road in defiance of the temporary injunction granted by
the Civil Court. The conduct of the defendants carrying out and
completing the construction work in defiance of temporary injunction
granted by the Court, has been taken cognizance by the First
Appellate Court referring to the pleading, i.e., para 6(B) and has
quashed and set aside the judgment and decree passed by the Trial
Court. It is unfortunate that the Trial Court did not read the plaint
especially para nos.6(A), (B) and (C) in its proper perspective. The
parties cannot be permitted to flout the orders of the Civil Court, if
such instances are brought to the notice of the Court and Court has
restored the possession on the date of filing of the suit, said order
cannot be said to be perverse.
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In my view, a party to the litigation, cannot be allowed to take an
unfair advantage by committing breach of an interim order passed by
the Civil Court and escape the consequences thereof. Wrong
committed by the party disobeying the order of the Civil Court should
not be allowed to continue or perpetuate such wrong as a precedent.
Such disregard of the order of the Civil Court should not be permitted
to hold good. Such disobedience, if brought to the notice of the Court,
what is the duty of the Court? A party suffering breach of injunction
order may or may not resort to provision laid down under Order 39,
Rule 2(A) of the Code of Civil Procedure. Such party may or may not
file or take out contempt petition in accordance with the provisions of
law. However, the Civil Court seized with hearing of such lis always
can resort to Section 151 of the Code of Civil Procedure. Imposition of
punishment or consequences of order passed under Order 39, Rule
2(A) of Civil Procedure Code and/or order passed by the competent
Court under the provisions of Contempt of Courts Act, 1971 would be
altogether different aspect of the matter. Citizens/litigants who
approaches to the Civil Court for adjudication of alleged rights is/are
basically interested in seeking remedy/decree/order from the
competent Civil Court. Primarily he has concern with relief of Civil
nature in his favour from the Civil Court upon adjudication of rights.
The Civil Court, therefore, is duty bound, to exercise inherent powers
under Section 151 of the Code for setting wrong at naught. This is
because it is of high importance that orders of the Court should be
obeyed. Thus, in my view, on principle those who defy a prohibition
imposed ought not to be able to get away with the fruits of their
defiance. If act of the disobedience were to let it go as such, it would
defeat the ends of justice and prevalent public policy. When the Court
intends a particular state of affair to exist while it is in seizin of lis,
that state of affair is not only required to be maintained, but it is
presumed to exist till the same Court orders otherwise or Superior
Court orders otherwise. The Court, in these circumstances, has the
duty and also right to treat such disobedient act as having not taken
place at all for its purposes. In my view, these inherent powers u/s. 151
of the Code of Civil Procedure are wide and are not subject to any
limitation. To put it in other words, it can be stated that where in
violation of stay order or injunction against a party, something has
been done in disobedience, it shall be the duty of the Court as a policy
to set the wrong, right and not allow the perpetuation of the wrong. In
my view, the inherent powers will not only be available in such case,
but it is bound to be exercise in that manner in the interest of justice.
Even apart from the Section 151 of Civil Procedure Code, in my view,
as a matter of judicial policy, the Courts should guard against itself
being stultified. In the circumstances like this it cannot be held that
Court is powerless to undoing a wrong done in disobedience of Court
orders. However, in the case on hand the First Appellate Court has
exercised such power under Section 151 of the Code. This exercise,
therefore, cannot be said to be arbitrary, absurd or perverse.
Paragraph 46 of Vidhya Charan Shukla (Supra) reads as under :
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46. We can see thus clearly that the Courts in India invariably
accepted the law applied in England and found (1) a party to the suit
if he had notice or knowledge of the order of the Court and (2) a third
party or a stranger, if he had aided or abetted the violation with notice
or knowledge of the order of injunction guilty of civil contempt and
otherwise found a (third party guilty of criminal contempt if he has
been found knowingly obstructing implementation of its order of
direction, if ii is found in the instant suit that Sri Shukla was directly
or indirectly a party defendant in the suit and the order of the learned
single Judge was directed to his conduct also and he violated the order
after notice or knowledge, he shall be guilty of civil contempt. He can
still be found guilty of civil contempt if he is found to have aided and
abetted the violation of the order of the Court. Even otherwise it is
found that he obstructed or attempted to obstruct the implementation
of the Court’s injunction/direction, he may be found guilty of criminal
contempt provided he had the notice or the knowledge of the order of
the Court. It will be only after a determination of the nature of the
disobedience that it will be possible for the Court to say whether the
procedure applied to a civil contempt shall be applied to the contempt
proceeding in his case or the procedure applied to a criminal contempt
will be applied to it. In the former case, the learned single Judge shall
be competent to proceed. In the latter case, it shall be before a
Division Bench and subject to such conditions as are envisaged under
the Contempt of Courts Act, 1971. We have however no hesitation, in
view of the principles of law noticed by us that this Court’s power as
the Court of Record will extend not only to the determination of the
contempt but also the determination whether on the allegations
brought before it, a civil contempt is made out or a criminal contempt
is made out and instead of any action of committal for contempt, the
Court should make any such order which would be in the
administration of justice or not. We ‘have already noticed that there
are provisions in Order XXXIX Rule 2A of the Code of Civil Procedure
as a remedy for the violation of temporary or interim injunction.
Besides what is contemplated under Order XXXIX Rule 2A of the Code
of Civil Procedure, Courts have found another source of power in
Section 151 of the Code of Civil Procedure and if that is also ignored
for a moment, this Court’s power as a Court of Record and a Court of
Special jurisdiction is preserved under Articles 215 and 225 of the
Constitution of India. There have been cases before several Courts in
which when faced with situations that some order or direction was
violated and the violation resulted in grave and serious injury, the
Courts took the view that the Code of Civil Procedure is not
exhaustive. There are cases which say that if remedy to do justice is
not provided for in the Code or any other Act, the High Court must not
fold its hands and allow injustice to be done.
30 The judgments relied upon by Shri Purohit on the aspect of Section
47 are clearly inapplicable. Firstly, neither of them deals with a
situation similar to the present one where a sale/transfer was done in
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breach of an injunction order and was permitted to be done by a party
despite knowledge of the injunction. Further, the said judgments were
not dealing with the aspects covered in the various judgments cited by
applicants, which squarely apply to the case at hand.
31 The contention of Shri Purohit that Order 21 of the Code of Civil
Procedure only provides for payment in 3 situations etc., proceeds on
the erroneous assumption that applicants are seeking a direction for
payment against CDSL in execution or by way of executing the decree
against CDSL. As stated above, as per prayer clause (a) the application
only seeks that the parties be restored to the status quo prevailing on
the date of the order and does not in any manner seek a direction for
payment against CDSL by way of execution of the decree. Once the
shares or the monetary value thereof with accrued benefits/interest, is
restored, applicants may then take appropriate steps in execution, as
permissible in law.
(emphasis and underlining added)
63) It thus appears that, the learned Single Judge has
invoked inherent power under Section 151 by treating CDSL as a
party acting in breach of the injunction. This is clear from the
finding recorded in paragraph 29 of the impugned order in which
it is held that:
“…Court has an inherent power, regardless of any other provisions in
law, to restore things to their former condition if a party has acted in
breach of an injunction”.
(emphasis and underlining added)
64) The judgment in Municipal Corporation, Shirdi (supra)
applies to a situation where a ‘party’ to litigation commits breach
of injunction. The judgment in Vidya Charan Shukla (supra) also
covers the liability of a third-party or stranger committing breach
of the injunction order by aiding and abetting such breach, who
can be held responsible for civil or criminal contempt. However,
for a third party to be held responsible for breach of an injunction
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order, the Court must arrive at a finding of aiding and abetment
by such third party and knowledge that it is committing breach of
the injunction order.
65) It is well settled principle that an Executing Court
exercising jurisdiction under Section 47 read with Order XXI of the
Code, in ordinary course, can make order only against parties to
the suit and their representatives. The Executing Court cannot go
beyond the decree and extend its scope so as to cover third parties
by making them virtually the judgment debtors. Section 47 of the
Code defines Court’s jurisdiction and confines it to adjudicating
only questions between parties to the suit and relating to the
execution, discharge or satisfaction of the decree. In this
jurisdiction, interim reliefs can only be granted in aid of final relief
and such interim reliefs would ordinarily lie only against parties
to the suit. However, there is an exception to this rule where an
Executing Court can reach its arms qua a third party who is found
to have aided and abetted violation of its order so as to frustrate
execution of the decree. It would be too far-fetched to hold that
under no circumstances, an Executing Court can touch a third
party who has actively breached the order of injunction with the
intention of aiding the Judgment Debtor in frustrating the decree.
In a given case, Executing Court may be justified in catching hold
of even a third party who has acted in connivance with the
Judgment Debtor in frustrating the execution proceedings.
66) Since CDSL is a third party to the proceedings, which
was not impleaded even in the Chamber Summons in which the
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ad interim injunction was granted, it became necessary for
Respondent Nos. 1 to 3 to demonstrate that it actively aided and
abetted breach of the ad interim injunction.
67) The advocate of Respondent Nos. 1 to 3 had
communicated the order of ad interim injunction to CDSL, which
position is undisputed. CDSL however raised a defence that it
made bonafide attempts to implement the order of injunction. The
learned Single Judge has however rejected this defence by
recording in paragraph Nos. 46 and 47 of the impugned order as
under:
46 The contention of CDSL that it could not locate the account of
ABG in its system as it was written as “ABG Securities Pvt.
Ltd.” and the system had it as “ABG Securities Private Limited”
and there are parties with multiple accounts and freezing an
account on the basis of inaccurate name would have disastrous
consequences are all untenable. Firstly, CDSL claims in its letter
addressed to the Receiver on 6th July 2007 that it located the
account details of ABG through ABG’s address of Shreyas
Building. This very same address had been given in the letter
dated 1st June 2005 enclosing the said order, and therefore,
there is no basis or cogent explanation as to why CDSL could
not have found the same at that time.
47 Further, in its reply letter dated 10th June 2005 CDSL at no
point stated that it could not locate the demat account of ABG,
due to the purported mismatch of the words “Pvt. Ltd.”, or
otherwise. On the contrary CDSL stated that it was in the
process of giving effect to the order in respect of the respective
demat accounts. It is rather unbelievable that a party would not
take the minimum effort of searching for ABG’s name both as
“Pvt. Ltd.” and “Private Limited”, when searching for the same
more so when there is an order of the Court. “Pvt. Ltd.” is too
commonly used a term for CDSL to contend that they did not
think to search for ABG’s name with “Pvt. Ltd.” and “Private
Limited”. As stated earlier, in its own letter addressed on 9th
August 2007, CDSL has referred to ABG as “ABG Securities Pvt.
Ltd.” (emphasis supplied)
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68) CDSL thus took the defence that it made effort of
searching ABG’s account by entering “Pvt. Ltd” and that the
search did not yield any result. The learned Single Judge,
however, refused to believe the said defence by holding that when
a search was made in the context and order made by the Court, it
was CDSL’s duty to search for ABG’s name both as “Pvt. Ltd” and
“Private Limited”. In our view, CDSL is a total stranger to the
transaction between the parties. It is not the case of Respondent
Nos. 1 to 3 that CDSL has colluded with the Judgment Debtors or
knowingly assisted them. As observed above, CDSL sits at the top
of the pyramid comprising of 16 crore plus Demat accounts
through 581 Depository Participants. In that view of the matter, it
is difficult to believe that CDSL had any intention/motive in
breaching the order of ad-interim injunction made by this Court.
No doubt, the Court was empowered to exercise its inherent
powers under Section 151 of the Code even qua a third party who
aids or abets violation of injunction. However, the learned Single
Judge has not recorded any finding that CDSL has aided or
abetted the Judgment Debtors in committing breach of injunction
order.
69) CDSL has never been party to any of the proceedings
and is sought to be roped in for the first time in Chamber
Summons No.55 of 2009. The shares in the concerned Demat
account belonged to ABG Securities and could be ordered to be
sold by the Executing Court towards satisfaction of liability of the
Judgment Debtor under the decree made on award passed in
arbitration proceedings. If there is a transfer of shares from the
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account of ABG Securities, ordinarily the said account holder
needs to be held liable for bringing back the amount/shares.
However, what is done by the learned Single Judge is to substitute
the Judgment Debtor with a new Judgment Debtor in the form of
CDSL. It is complained by the CDSL that such a course of action
amounts to going beyond the decree and extending its scope by
added a new Judgment Debtor to the decree. As observed above,
in a rare case where the Court has found that a third party has
acted in connivance with the Judgment Debtor in frustrating the
decree, the Executing Court may exercise inherent powers or any
other powers under the Code to hold such third party responsible
for the breaches and make necessary directions against it. Adding
a new Judgment Debtor to the decree by making it liable to bring
back to the Court monetary value of the transferred shares is a
drastic order, which cannot be passed in ordinary course. It would
require an extraordinary circumstance where the Court notices
that there is active participation by the third party in frustrating
execution of the decree by the third party with full knowledge of
what exactly it is doing. Mere act of negligence of a third party,
which may result in frustrating execution of decree is not enough
for holding a third party responsible for restoration of status quo
ante. Therefore, even if the Executing Court is satisfied that a third
party is found responsible for transfer of ABG’s shares, that
finding alone would be insufficient to make an order against third
party making it responsible to discharge obligations of the
Judgment Debtor. To adopt such a course of action, there must be
extreme degree of mens rea where the third party is found to have
actively connived with the Judgment Debtor in siphoning off the
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Judgment Debtor’s property by sale of which the decree could be
satisfied.
70) In the present case, there is neither any material to
indicate nor any finding is recorded by the learned Single Judge
that CDSL has travelled to such an extent of committing active
breach of order of ad-interim injunction by conniving with the
Judgment Debtor. Respondent Nos.1 to 3 themselves do not
contend that CDSL has connived with the Judgment Debtors.
Their allegation essentially seeks to depict gross negligent act of
CDSL in not conducting proper search by blocking the
transactions in Demat account of ABG Securities. True it is that
CDSL ought to have been careful enough in ensuring compliance
with the order of ad-interim injunction. Its defence of making an
endeavour to search the Demat Account of ABG Securities by
entering into search engine the words ‘Pvt. Ltd.’ is not found
favour with the learned Single Judge. However, this would only
mean that CDSL has acted negligently in not walking enough
distance by conducting proper search by entering into the words
‘Private Limited’ into its search engine. However, this conduct, by
no stretch of imagination, would amount to connivance with the
Judgment Debtor in actively aiding breach of ad-interim order of
temporary injunction. There was no reason for CDSL to do so. In
our view therefore the case does not pass the muster for holding
CDSL responsible for actively aiding and abetting violation of ad-
interim injunction by conniving with the Judgment Debtors.
Therefore, the long arms of the Executing Court cannot reach
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CDSL which has been total stranger to the proceedings between
the rival parties.
71) In our view, therefore CDSL cannot be held responsible for
bringing back the amount of Rs. 1,79,62,131.56/-.
Amu’s Appeal No. 109 of 2019
72) Amu was impleaded as a party Respondent to
Chamber Summons No. 534 of 2005 and was made aware of the
order of ad-interim injunction. Amu has however taken two
defences, (in addition to few more), that it was not aware of the
order dated 6 May 2005 by the Advocate and in any case, the
order dated 6 May 2005 was not directed against Amu. The exact
defences raised by Amu before the learned Single Judge have been
captured in paragraph 53 of the impugned order :-
53 Shri Jain submitted that :
(A) Though a party to the order dated 6th May 2005, Amu was
not aware of the order passed and was not informed correctly
about the order by its Advocate.
(B) There was no order against Amu and therefore, Amu is not
liable to ensure compliance thereof or for a breach thereof.
(C) ABG had a debit balance and therefore Amu was entitled to
sell the shares and appropriate proceeds in exercise of a
stockbroker’s lien under the Bombay Stock Exchange Byelaws,
notwithstanding the injunction.
(D) Amu’s contentions that assuming Amu had violated the
injunction, no useful purpose would be served in making it
bring back the shares or the value thereof, if eventually Amu
would be entitled to appropriate all the shares in exercise of the
lien.
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(E) The present proceedings be treated as garnishee proceedings
and Amu would be treated as a garnishee who is entitled to
adjust against the claim stated to be owing by it.
(F) ABG is being proceeded against pursuant to execution of the
order of 6th May 2005 and lifting of the corporate veil of ABG
by the order dated 7th December 2005 which order of 7th
December 2005 was not continued on 27th January 2009 (page
562) as the said order dated 7th December 2005 has not been
further extended, there can be no execution against ABG in
respect of the order dated 06.05.2005.
(G) Amu is an independent stockbroker acting on an arm’s
length basis and not at the behest of Ghosh.
73) The learned Single Judge has rejected the defence of its
Advocate not informing the order of ad interim injunction to Amu.
The defence was rather bizarre and goes against the principle that
the knowledge acquired by party’s advocate about the order
becomes knowledge by the party as well. The defence appears to
have been taken to somehow escape the liability arising out of
active aiding in violation of the injunction order, which act of
Amu is being discussed separately. We are therefore in agreement
with the finding of fact recorded by the learned Single Judge in
rejecting Amu’s defence of failure to inform order dated 6 May
2005 by its Advocate.
74) So far as objection that the order dated 6 May 2005 was
not made against Amu, ordinarily the findings recorded by us qua
CDSL could have applied for Amu also. However, the learned
Single Judge has recorded specific findings which indicate that
Amu was closely associated with the Judgment Debtors and has
acted in active participation in defeating the order of injunction.
We proceed to examine correctness of those findings.
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75) The shares in the Demat account of ABG Securities
have been sold by Amu. Amu raised a defence that it had a debit
balance in the account of ABG Securities and was, therefore,
entitled to sell the shares and appropriate the proceeds. This
defence is rejected by the learned Single Judge by holding in
paragraph 66 to 73 as under:
Court’s views on Shri Jain’s submissions – Paragraph 53 (C) and (D):
66 In my view, these contentions are unacceptable. I say this because at
no point of time in the present pleadings or in the last 13 years has
Amu ever expressly asserted any lien. It is only stated that there was a
purported debit balance and that Amu was authorized by a purported
letter of Ghosh and ABG, copies whereof are at Exhibit 2 and Exhibit 3
to the affidavit in reply dated 15th June 2009 of one Arvind M. Shah, to
retain the sale proceeds of the shares for further adjustments. If indeed,
Amu had a lien in law which it was entitled to assert, no such letters
would have been required. This clearly shows that Amu has never
asserted a lien. Further, even assuming for a moment that Amu had a
right of lien and/or the right to sell the shares, the same could never
have been permitted in breach of the said order of injunction. The very
minimum that would have been required was for Amu to come before
this Court and seek modification or vacation of the said order. I have
to note, Shri Jain, in fairness agreed that Amu should have approached
the Court for clarification or leave to sell and appropriate. Instead
Amu has indulged ABG in speculation of sale and purchase of shares
after the said order, as evident from the figures at page 17 of Amu’s
chart dated 10th December 2018. For ease of reference, the Chart is
reproduced herein below :
STATEMENT OF AMU’S DUES RECOVERABLE FROM ABG
SECURITIES PRIVATE LIMITEDOpening Balance as on -49,51,535.89 Page 362 (Ledger Account) &
the date of Page 351 (Correspondence)
the injunction, i.e., 6.5.05
Speculation Transactions -92,77,874.65 See Statement (INTRA DAY
SQUARE OFF
TRANSACTIONS)
Purchase Amount -1,22,29,803.40 See Statement (DELIVERTY
PURCHASE TRANSACTIONS)
Total Sale Amount 2,42,25,715.78 See Statement (DELIVERY
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Expenses Amount -6,96,984.78 See the Statement hereunder
Cheque received from 10,00,000.00 Page 367 (Ledger Account)
ABG (towards the bottom)
Securities
Closing Balance at the -19,30,482.94 Page 367 (Ledger Account) &
very end Page 351 (Correspondence)SERVICE TAX 10,381.25
STAMP DUTY (MAHARASHTRA 84,686.88
GOVERNMENT)
SECURITIES TRANSACTION TAX 4,32,178.84
(STT)
GOVERNMENT OF INDIA
TRANSACTION TAX (BOMBAY 1,69,737.81
STOCK
EXCHANGE)
TOTAL EXPENSES 6,96,984.7867 Having failed to apply for modification or vacation and having
actively permitted the share transfers in breach of the injunction, it
does not lie with a defaulting party to contend before this Court that
there is no major prejudice caused by the sale/transfer and that the
breach ought to be excused. All the judgments cited by applicants
speak of the majesty of the Court not being permitted to be diluted by
a person acting in breach of the order. It is unstateable for a party who
commits/permits the breach to say that no material difference would
have occurred if the order had been complied with and therefore the
breach, done intentionally and with full knowledge of the
consequences, ought to be ignored. The reliance of Amu’s Advocates
on the judgment of Ghanshyam Sarda (Supra) is misplaced. The Apex
Court has simply exercised a discretion on the facts and circumstances
of that case as opposed to the brazen manner in which the injunction
has been violated by ABG/Amu.
68 In every case, where a party claiming to be a secured creditor (as
Amu purports to be) seeks to raise an attachment or restraint on the
property secured to it, the party must come before the Court and seek
lifting/modification of the order of injunction. To not insist on the
same and to permit a party to be excused from complying with the
order of this Court would result in misuse as parties would at their
ipse dixit decide whether or not to comply with orders of the Court.
69 It is to avoid this very malaise that the Hon’ble Supreme Court and
the High Courts have held that as a matter of judicial policy the orders
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any actual benefit is served from restoring the status quo ante or not is
entirely irrelevant and cannot possibly be a factor relied upon by the
defaulting party to justify its breach and avoid the consequence of
having to restore the status quo ante.
70 Once the shares/value thereof are brought back, and if Amu seeks
to withdraw the same, it will be open to applicants to resist the same
by urging, inter alia, that Amu could never have claimed a lien on the
said shares as Amu was in fact barred by law from dealing with the
said shares.
71 On the facts and merits of the claim for lien in the present case, even
assuming Amu had a lien which they could have exercised, to what
extent Amu may be permitted to retain the benefit from the shares
sold/transferred has to be ascertained. I have considered in detail the
chart that Shri Jain tendered with a compilation on 10th December
2018. Prima Facie, it appears, shares transferred out of ABG’s CDSL
demat account after the injunction order dated 6th May 2005 were
valued at Rs.1,79,62,131.56 as on the date of their respective transfer as
per Schedule V to the chamber summons or Rs.2,42,25,715.78 as per
page 17 of Amu’s chart dated 10th December 2018. Amu’s purported
balance upon which they could arguably contend that they had a lien
was Rs.49,51,535.89 (Amu’s ledger) being the purported closing
balance as on the date of the injunction. Under no circumstances, can it
be suggested that even after the injunction, Amu was entitled to
continue to sell and buy shares for ABG, permit ABG to indulge in
speculation, rack up a huge purported loss and thereafter claim
appropriation of lien of the entire purported loss from the shares
sold/transferred in breach of the injunction.
72 It is crucial that the said shares be brought back with accrued
benefits or their monetary value along with interest thereon from 2005.
It is nowhere proved by Amu that in fact there was a debit balance of
Rs.49,51,535.89/-. The accounts relied upon by Amu have no
supporting material, nor are they audited or certified accounts. They
are simply Amu’s internal ledger which is under their sole control.
Once the shares are brought back, Amu will have to first establish and
prove the existence and veracity of such purported debit balance. In
para 13(f) of applicants’ affidavit in rejoinder dated 31st July 2009, it
has been stated that Amu refused to furnish the particulars of the
entries in its accounts and refused to furnish copies of the documents
pertaining to entries in the said accounts (including copies of bills and
journal vouchers) and an adverse inference should be and ought to be
drawn against Amu. In reply, Amu in its Affidavit in surrejoinder
dated 6 th November 2009 in para 23, has inter alia stated that Amu is
not bound to furnish any particulars of the entries in its accounts or
copies of the documents pertaining to entries in the said accounts.
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Applicants have specifically disputed the veracity of Amu’s purported
ledger account.
73 Pertinently, Amu had never asserted any right of lien in respect of
the said shares at the time of passing of the said order dated 6th May
2005, though present through their Advocate. At no point in the
ensuing 13 years has Amu ever asserted a claim or filed proceedings
against ABG and/or Ghosh in respect of the purported debit balance it
claims it still has. Amu’s conduct could be viewed with suspicious
collusion with Ghosh. Amu only started dealing with ABG in June
2004 after service on May 11, 2004 of the earlier chamber summons
no.754 of 2004; ABG is clearly a front for Ghosh, against whom the BSE
Award was passed and execution was pending.
76) In the present case, Amu has not acted as a mere
stockbroker by acting on instructions of the demat account holder.
It has sold the shares itself for satisfaction of alleged amount due
to it. It appears that transactions of buying and selling shares for
ABG Securities continued after passing of order of injunction and
ABG Securities was permitted to indulge in speculation for the
purpose of racking up a huge purported loss and thereafter Amu
raised claim for appropriation of lien of the entire purported loss
by selling shares in the Demat account of ABG Securities.
77) The learned Single Judge has recorded an emphatic
finding that Amu was actually acting in aid of Ghosh/ABG
Securities and not in exercise of lien, which is evident from the fact
that Amu also purchased shares during the relevant period. To
make things worse for Amu, the learned Single Judge has held in
paragraph 83 of the order that Amu was otherwise closely
associated with Ghosh and always acted at the behest of Ghosh.
The findings recorded in paragraph 83 of the order reads thus:
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Neeta Sawant APP-104-109-2019-FC83 Amu has represented as if it is an innocent arm’s length stockbroker
dealing for its constituent and therefore should not be liable for breach
of the order. This is untenable as evident from the following :
(i) Amu is an entity which was closely connected with and
acting at the behest of Ghosh. This observation is based only on
the admitted facts from Amu’s own affidavits;
(ii) Amu has admitted that Ghosh was a signatory on the bank
account for respondent nos. 4 to 6 herein, which are entities of
Amu’s directors, i.e., respondent nos.2 and 3 herein;
(iii) Respondent nos.2 and 3, who were Amu’s Directors, had
appointed Ghosh as a consultant and for this purported
consultancy had given Ghosh, inter alia, luxurious flats at
Anand Niwas, A Road Churchgate, and thereafter at Shreyas
Building, Nariman Point to live in, for free, for which Amu was
the licensee and was paying significant rent;
(iv) Amu made payment of Rs.8,26,643/ to the Official Assignee
of this Court, on 16th December 2005, on behalf of Lily who was
declared insolvent; and
(v) Amu has at Ghosh/ABG’s behest carried out huge
transactions after the injunction order.
78) Correctness of the above findings is not seriously
disputed before us. Thus, Amu appears to be closely associated
with Gosh family and its entities. The act of Amu selling the
shares in the demat account of ABG securities therefore needs to
be viewed from the close association of Amu with the Judgment
Debtors. Amu has apparently permitted Ghosh and ABG
Securities to indulge in speculation for carrying out huge
transactions after the injunction order solely for the purpose of
creation of liability/debit for discharge of which the shares are
shown to have been sold. Thus, Amu cannot be put on the same
pedestal as that of CDSL.
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79) While absolving CDSL of responsibility to pay to the
Receiver the amount as directed by the learned Single Judge, this
Court has recorded a finding that CDSL’s acts do not constitute
active aiding or abetting of violation of ad-interim injunction in
connivance with the Judgment Debtor. However, we are unable
to record same findings qua Amu on account of connection
established between Amu and Judgment Debtors by the learned
Single Judge which would bear out motive on the part of Amu to
frustrate the order of ad-interim injunction. Unlike CDSL, Amu
had every reason to act in connivance with the Judgment Debtor
to frustrate the execution proceedings. The learned Single Judge,
upon perusal of the material before it, has rejected the defence of
Amu’s lien on share of ABG Securities. The defence of lien, to our
mind, does not appear to be not a bonafide one. The learned Single
Judge has also examined the manner in which liability was created
by indulging into speculating activities solely for the purpose of
enabling sale of shares by Amu to frustrate the decree. Though,
Mr.Cama has strenuously contended and has also taken us
through some of the documents to indicate that Amu sold shares
of ABG Securities to itself, we do not find any finding to that effect
being recorded by the learned Single Judge. As of now, Amu is
directed to merely bring back the specified amount before the
Court and the exact role played by Amu in the entire transaction
can be subjected to further scrutiny during the course of decision
of execution proceedings.
80) Thus, there are atleast two distinguishing factors
between CDSL and Amu. Firstly, Amu was a party to the
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Neeta Sawant APP-104-109-2019-FC
Chamber Summons in which ad interim order was passed. The
purpose of its impleadment was to ensure obedience with the
order that would be passed in the Chamber Summons. It was
made aware of the exact dispute between the parties and cannot
feign ignorance. The actions of Amu in selling the ABG’s shares
needs to be understood in the light of acquisition of knowledge by
it about the proceedings. Secondly, Amu is not a total stranger and
is found to be closely associated with judgment debtors. It
therefore had every reason to assist the judgment debtors in
commission of breach of the injunction order.
81) The Executing Court therefore is justified in extending
its long arm and make Amu bring back the money of sold shares.
We are, therefore, not inclined to grant any relief in the appeal
preferred by Amu.
82) Thus, the impugned order deserves interference only
in CDSL’s appeal and no relief deserves to be granted in Amu’s
favour. Consequently, we proceed to pass the following order:
i. Appeal No. 104 of 2019 filed by CDSL is allowed and
order dated 9 January 2019 passed in Chamber
Summons No. 55 of 2009 is set aside only qua CDSL.
ii. Appeal No. 109 of 2019 filed by Amu is dismissed and
order dated 9 January 2019 qua Amu is upheld.
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83) With the above directions, both the appeals are
disposed of.
[SANDEEP V. MARNE, J.] [CHIEF JUSTICE]
Digitally
signed by
NEETA
NEETA SHAILESH
SHAILESH SAWANT
SAWANT Date:
2025.08.12
19:41:10
+0530
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