IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 3921 of 2012 For Approval and Signature:
HONOURABLE MS JUSTICE SONIA GOKANI =================================================
1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
Whether this case involves a substantial question of law
4 as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
================================================= GUJARAT STATE ELECTRICITY CORPORATION LIMITED - Petitioner(s) Versus MULTIPLEX TRADING AND INDUSTRIAL COMPANY LTD - Respondent(s) ================================================= Appearance :
MR SB VAKIL, SR. ADV. with MR PREMAL R JOSHI for Petitioner(s) : 1, BHARGAV KARIA & ASSO for Respondent(s) : 1, ================================================= CORAM : HONOURABLE MS JUSTICE SONIA GOKANI Date : 13/08/2012 CAV JUDGMENT
1. This is a petition under Articles 226 and 227 of the Constitution of India by Gujarat State Electricity Corporation Limited ('GSECL' for short) against the order dated 9.3.2012 passed by 10th Additional District Judge(Adhoc), Vadodara allowing Miscellaneous Civil Application No.7 of 12 of the respondent permitting the respondent to withdraw the amount of Rs.4 crores deposited by the petitioner with this Court in lieu of solvent security produced before this Court.
2. Brief facts of this case are as follows.
The petitioner filed First Appeal No.2817 of 2010 under Section 37 of the Arbitration and Conciliation Act, 1996 ('the Act' for short) against order dated 20.3.2010 of Civil Judge, Vadodara dismissing the objection of GSECL's objection Section 34 of the Act against arbitral award dated 8.9.2007 for the sum of Rs.8 crores (round about) to Multiplex towards service charges, interest thereon at 12% per annum from 11.5.2000 till the date of the award and future interest at 12% per annum on the principal amount from the date of the award till payment.
3. Civil Application No.11112 of 2010 was preferred by GSECL pending the appeal for stay of execution and implementation of order dated 20.3.2010 of the trial Court. This Court, vide order dated 8.3.2011 stayed the execution and implementation of the arbitral award on the condition that GSEL deposit sum of Rs.8 crores with the Court and further furnish bank guarantee of Rs.6 crores. Pursuant thereto the petitioner deposited Rs.8 crores and also furnished the bank guarantee as directed. Civil Application No.8681 of 2011 was preferred by the respondent herein seeking permission to withdraw Rs. 8 crores deposited by GSECL and the Court directed as follows vide its order dated 25.11.2011: “10.Hence, the following order
A) Out of the amount which has been deposited of Rs.8 crore, the applicant shall be permitted to withdraw Rs.4 crore upon furnishing of the solvent security to the satisfaction of the trial court, of such equivalent amount. Such security shall be furnished within eight weeks.
B) It is also observed that at the time when the solvent security is to be accepted by the lower court, the lower court shall intimate both the parties to the proceedings and after verification of the security so furnished, actual withdrawal shall be permitted.
C) The remaining amount of Rs.4 crore shall be permitted to be withdrawn by the applicant on furnishing the bank guarantee of the equivalent amount, of continuing character until the final disposal of the appeal, of a nationalised bank or HDFC Bank. The bank guarantee shall be furnished within a period of 8 weeks.
D) There is no report about the investment made of the amount of Rs.8 crore by the office, but if the investment is already made, such investment shall continue until the actual withdrawal takes place. In the event the investment is not made, the same shall await for a period of eight weeks and if the bank guarantee is not furnished and/or actual withdrawal does not take place, the investment shall be made by the office of Rs.8 crore or 4 crore as the case may be initially for a period of 1 year and such investment shall be renewed from time to time until further orders.”
4. This petition concerns with direction given at 10(A) of the order dated 25.11.2011 of this Court. It is urged that Rs.4 crores of bank guarantee till the date is not being tendered, however, it was stated by the respondent that it is in the process of obtaining bank guarantee.
5. On 19.1.2012 respondent filed Miscellaneous Civil Application No.
7 of 2012 in the trial Court for permission to withdraw Rs. 4 crores deposited by GSECL along with which it produced (1) affirmed undertaking dated 19.1.2012. (2). Solvency certificate dated 16.1.2012 issued over the signature of the Executive Magistrate, Connaught Place for Deputy Commissioner (2) Valuation report of N.K.Saini and Associates of Flat on Second floor on Plot No.11, Babar Lane, Babar Road, Bengali Market, New Delhi by land and building method showing land value at Rs.6.80 crores (round about) and value of building structure at Rs.18.34 crores (round about).(4) Sale deed dated 28.1.2000 in favour of Mr.Anil Saraf and (5) Municipal Tax receipt issued by New Delhi Municipal Corporation.
6. After much contest, the trial Court permitted withdrawal of the amount of Rs.4 crores on solvent security produced by the multiplex.
7. Being aggrieved by the impugned order darted 9.3.2012 of the trial Court in Miscellaneous Civil Application No. 7 of 2012, this petition is preferred.
8. Learned Senior Advocate Mr. S.B.Vakil has urged that the trial Court has acted on the inadmissible evidence. The solvency certificate and valuation report in support of which there is no affidavit filed by Mr. Anil Saraf or the Executive Magistrate or the Valuer. It is further urged that solvency certificate is executed by Executive Magistrate, Connaught Place and not by Deputy Commissioner, Delhi. The Executive Magistrate is not Collector and therefore, the Act does not provide for delegation of the functions of Deputy Commissioner. The solvency certificate being very vague and the undertaking being affirmed and unregistered, it does not purport to create any interest in the property tantamount to a security for the refund of Rs.4 crores permitted to be withdrawn. It is further urged that the security is situated at Delhi which is outside the jurisdiction of the trial Court and recovery of any money by sale thereof would be too cumbersome to be feasible at all.
The trial Court, according to the learned advocate for the petitioner, failed to appreciate the meaning and effect of “solvent security” and the documents produced by Multiplex does not create any interest in the property, the sale proceeds whereof would be available exclusively to assure refund of the amount withdrawn and not accessible by any other creditor in execution of the rateable distribution.
It is further urged that there is difference between solvent security and solvency certificate. Solvent security would mean a security available, if and when the amount withdrawn is required to be refunded and if not refunded can be recovered from the security. A solvency certificate merely certifies that the person concerned is solvent to the extent specified in the certificate.
9. Learned Senior advocate also contended that merely offering the property as solvent security does not in law convert the property into security. He further stated that Mr. Anil Saraf has ensured not to create any third party rights however, he has not created any security for the benefit of GSECL. Moreover, according to the counsel, not creating any third party rights till the property is offered as solvent security has no meaning, as the property is offered by Miscellaneous Civil Application dated 19.1.2012 and the undertaking not to create any third party rights would come to an end on the same day the undertaking is given.
10. He further urged that notwithstanding the solvency certificate, the undertaking and the contents of Miscellaneous Civil Application, the property could be proceeded against by any creditor for recovery of his dues and would be available for rateable distribution under Code of Civil Procedure.
11. He emphasized that the trial court has erred in accepting the solvency certificate as solvent security.
12. Learned Senior Advocate also placed reliance on the aspect of delegation of power, he relied upon the judgment of the Apex Court in the case of M.Chandru vs. MemberSecretary, Chennai Metropolitan Development Authority and another reported in (2009)4 SCC 72 and in the case of Bhupal (Defendant) vs. Jag Ram ( Plaintiff) reported in Indian Law Reports VolII, 1879.
In the case of M.Chandru vs. MemberSecretary, Chennai Metropolitan Development Authority and another, the Apex Court was concerned with the question of delegation. It held that delegation is permissible only when there is provision in the statute with a further noting that existence of such a provision in the statutory regulation is not sufficient.
In the case of Bhupal (Defendant) vs. Jag Ram ( Plaintiff) reported in Indian Law Reports VolII, 1879, there was a promise given by judgment debtor that he would not alienate his property or that of his father's until the amount of both decrees has been paid and if he so does, he would first pay the amount of decrees.
In contravention of such promise when he sold his property, the plaintiff sued the defendant to establish his right to recover the amount of decree by selling his property.
The Court at the first instance gave a decree and on appeal this was confirmed by the appellate Court.
13. He further urged that there is vague language used in the certificate. In sum and substance it was his contention that the solvent security must be able to secure the amount which is sought to be withdrawn. It should be capable of meeting the scheme in the event of any such eventuality.
14. Learned advocate Mr. Bhargav Karia appearing for the respondent has urged that it is the discretion of the trial Court as had been directed in the order. Moreover, person giving an affidavit is conscious that any breach would make him liable for imprisonment. He further urged that it was solvent security to the satisfaction of the trial Court, which was needed to be given. This Court need not interfere with the petition under Article 227 of the Constitution of India. He further urged that the bank guarantee has been given by the applicant and that amount would continue to be with the Bank. He sought to rely upon the following authorities:
1. Jharkhand State Electricity Board, through its Chairman and Ors. vs. Sukh Sagar Metal Pvt. and another decided on 6.7.2011 by the High Court of Jharkhand at Ranchi.
2. Bharat Bhushan Pareek vs. Addl. District & Sessions Judge (Fast Track), No.3, Jaipur City, Jaipur & Ors. Decided on 18.8.2011 by the High Court of Judicature for Rajasthan at Jaipur Bench, Jaipur.
15. In the case of Jharkhand State Electricity Board, through its Chairman and Ors. vs. Sukh Sagar Metal Pvt. and another (supra), it was contended that solvent security since was not furnished, it cannot be permitted to withdraw the amount. The Division Bench accepted the submission of the other side that solvent security does not necessarily mean bank guarantee and the bank security normally has different connotation. The Court noted that since the photo copy of the documents of the property are already submitted by the respondent to the Electricity Board and the property since was not encumbered property, the Court directed that no charge shall be created over the said property till the decision of the writ petition and accordingly, disposed of the matter.
16. Rajasthan High Court in the case of Bharat Bhushan Pareek vs.
Addl. District & Sessions Judge (Fast Track), No.3, Jaipur City, Jaipur & Ors.(supra) was also confronted with the question of solvent security where again it was left to the satisfaction of the trial Court to see whether the solvent security furnished was in fact proper and well in tune or not? It therefore held that the solvent security was not required to be furnished to the satisfaction of this Court but of the trial Court and for this purpose, extraordinary jurisdiction under Article 227 of the Constitution of India cannot be invoked.
It was, at the outset, suggested to the learned Senior Advocate of the petitioner that if there is any further clarification that was necessary to obtain the same could be sent to the concerned Court which had directed solvent security. However, it was insisted upon by the learned counsel for the petitioner that the order of the trial Court is being challenged under Article 227 of the Constitution of India and therefore this Court should decide this petition.
17. In light of the submissions made by both the sides and the order impugned, if is examined, learned Judge has allowed Miscellaneous Civil Application No. 7 of 2012 permitting withdrawal to the respondent herein of Rs.4 crores deposited by the petitioner. He held therein that in lieu of solvent securities produced before the Court for and on behalf of the opponent, such permission is granted. He is also of the opinion that the petitioner is raising frivolous objections to the solvency certificate evidently for the purpose of delaying the withdrawal of this amount of Rs. 4 crores. It is further held that annual return of the respondent for the year 20102011 filed with ROC along with Form No.20 would reveal that Mr. Anil Saraf is the Director and shareholder of respondent. He is also promoter of respondent and primary share holder holding 44.62% of the equity shares in the company and remaining shares are held by his family members and associate companies. He furthermore held that petitioners are making deliberately misleading submissions and there will be no requirement for mortgaging property by registered documents.
18. At the outset, it would be necessary to reproduce relevant judgment of the Apex Court in the case of Surya Dev Rai Vs. Ram Chander Rai and others reported in (2003) 6 SCC 675, which is as under: “38. (4) Supervisory jurisdiction under Article 227 of the Constitution is exercised for keeping the subordinate Courts within the bounds of their jurisdiction. When the subordinate Court has assumed a jurisdiction which it does not have or has failed to exercise a jurisdiction which it does have or the jurisdiction though available is being exercised by the Court in a manner not permitted by law and failure of justice or grave injustice has occasioned thereby, the High Court may step in to exercise its supervisory jurisdiction.
(5) Be it a writ of certiorari or the exercise of supervisory jurisdiction, none is available to correct mere errors of fact or of law unless the following requirements are satisfied : (i) the error is manifest and apparent on the face of the proceedings such as when it is based on clear ignorance or utter disregard of the provisions of law, and (iii) a grave injustice or gross failure of justice has occasioned thereby.
(6) A patent error is an error which is selfevident, i.e., which can be perceived or demonstrated without involving into any lengthy or complicated argument or a longdrawn process of reasoning. Where two inferences are reasonably possible and the subordinate court has chosen to take one view the error cannot be called gross or patent.
(7) The power to issue a writ of certiorari and the supervisory jurisdiction are to be exercised sparingly and only in appropriate cases where the judicial conscience of the High Court dictates it to act lest a gross failure of justice or grave injustice should occasion. Care, caution and circumspection need to be exercised, when any of the abovesaid two jurisdictions is sought to be invoked during the pendency of any suit or proceedings in a subordinate court and error though calling for correction is yet capable of being corrected at the conclusion of the proceedings in an appeal or revision preferred there against and entertaining a petition invoking certiorari or supervisory jurisdiction of High Court would obstruct the smooth flow and/or early disposal of the suit or proceedings. The High Court may feel inclined to intervene where the error is such, as, if not corrected at that very moment, may become incapable of correction at a later stage and refusal to intervene would result in travesty of justice or where such refusal itself would result in prolonging of the lis.
(8) The High Court in exercise of certiorari or supervisory jurisdiction will not covert itself into a Court of Appeal and indulge in reappreciation or evaluation of evidence or correct errors in drawing inferences or correct errors of mere formal or technical character.”
19. It also needs to be mentioned that unless there are extraordinary circumstances, no interference is warranted in the order of the trial Court, the Court has to very sparingly exercise the powers of supervisory jurisdiction. The Apex Court has gone to the extent of saying that even when there is an error of fact or law but, unless grave injustice is caused to the appellant, interference would be uncalled for. At the touchstone of this fundamental requirement, the order impugned is to be examined. One needs to remember that during the pendency of First Appeal No.2817 of 2010 under Section 37 of the Act, this Court has directed withdrawal of Rs.4 crores by furnishing the solvent security to the satisfaction of the trial Court.
20. It can be noted from the submissions of both the sides so also from documentary records that respondent has deposited the sum of Rs. 4 crores towards bank guarantee, the only question that has been raised is with regard to the solvent security. Solvent security is not defined anywhere as rightly contended and the question that arises, therefore, is as to whether the documents produced by respondent herein can be said to be meeting the requirement of furnishing of solvent security or whether the trial Court has erred by confusing the solvency certificate with solvent security and whether such confusion would render solvency certificate incapable of securing the amount, which is sought to be withdrawn by the petitioner herein. Arbitral award is of Rs.8 crores, out of which Rs.4 crores has already been given by way of bank guarantee. However, this remaining amount of Rs.4 crores is sought to be withdrawn.
21. Admittedly, the property is situated in Delhi and not within the territorial jurisdiction of the Courts in Gujarat. It appears that the solvency certificate has been issued on 16.1.2012 on the basis of the report of valuer dated 7.1.2012. Attestation has been done on 19.1.2012 and the certificate impugned issued under the Delhi Land Revenue Code, 1954. It would be apt to reproduce solvency certificate as under: “ On the basis of the documents produced by Sh./Ms.Anil Saraf s/o., D/o. W/o. Sh. Late Girdharilal Saraf R/o. Second Floor, 11 Babar Lane, Bengali Market, New Delhi 110001. It appears that Anil Sarat, s/o. Late Girdharilal Saral, R/o Second Floor, 11 Babar Lane, Bengali Market, New Delhi110001 is reasonably solvent to the tune of Rs.4,00,00,000/ ( Four Crores only.) This certificate is being issued to Sh./Ms/ Anil Saraf on the basis of documents and application, stating that , the same is required for release of money.”
This has been executed by Executive Magistrate, Connaught Place for and on behalf of Deputy Commissioner. Additionally there was an undertaking furnished on 19.1.2012 by Mr. Anil Saraf, the sole owner of the property, which is annexed at AnnexureD to the petition.
22. Main apprehension in the mind of the petitioner is that the purported security which has been furnished by submitting an undertaking is not addressed to anyone and is merely signed by Mr. Anil Saraf for creating security for withdrawal of the amount of Rs.4 crores is no security at all. Such land and building is required to be mortgaged to officer as directed by this Court by registered document otherwise there will not be any priority for recovering back Rs.4 crores from the security.
23. It can be noted from the submission as well as from the record that the process of issuing solvency certificate is provided on the website of NCT of Delhi. As per the Section 152 of Delhi Land Revenue Code, the Deputy Commissioner exercises the power of Collector and the solvency certificate is duly issued by the office of the Deputy Commissioner, New Delhi District. It also further appears from the details that the respondent has filed one solvency certificate duly issued by the Deputy Commissioner, Certified copy of the title documents, document of the property offered by Mr. Anil Saraf, valuation report, property tax receipt and mutation order.
24. It is the Executive Magistrate on behalf of Deputy Commissioner, New Delhi discharging the official duty has issued such certificate.
25. It emerges from the order of the trial Court in light of the details mentioned hereinabove being conscious of the fact that it is a huge amount for which subjective satisfaction requires to be exercised by it, as per the direction of this Court satisfied itself.
26. This Court has examined the law on the subject and the procedure undertaken for getting solvency certificate executed by the competent authority on the basis of the documentary evidence produced by the concerned applicant and it appears that applicant applied for such solvency certificate before the Deputy Commissioner who appropriately issued the same and the Court is fully satisfied by such solvency certificate. As far as solvency certificate is concerned, subjective satisfaction arrived at by trial Court is based on objectivity and hence, requires no interference on the basis that the issuing authority acted without authority of law.
27. However, question that needs determination is whether this solvency certificate is a solvent security contemplated under the law. It is correct that the solvency certificate is not a synonym of solvent security and it is equally true that when the trial Court is directed to be satisfied in respect of the solvent security, it is the subjective satisfaction of the trial Court, which shall have to be exercised in accordance with law keeping in mind the object of directing furnishment of solvent security. The whole object is to ensure that the amount which is sought to be withdrawn in the event of contingency can be secured back.
This certificate which has been issued is in respect of Mr. Anil Saraf, who is the Director and shareholder of the opponent company. He is also the Director and primary share holder having holdings of 44.62% as deposed on oath. Of course, his solvency to the tune of Rs.4 crores is on the date on which such certificate has been issued and the same has been issued on the basis of his property situated at New Delhi. What is therefore being rightly objected to is that with no security having been offered or property not being mortgaged and in absence of any charge over the security, the Solvency certificate of person concerned will loose its significance, if eventually the solvent property does not remain. His undertaking offers property for and on behalf of multiplex Trading and Industrial Company situated at 11, Babar Lane, Bengali Market, New Delhi admeasuring 330 sq.yard having the value worth Rs.6.98 crores (rounded off). Issuance of such certificate by Executive Magistrate from the office of the Deputy Commissioner though having been found to be genuine and the same cannot be surely termed as either sham or concocted document, however, additional aspect that ought to have been insisted upon by the trial Court is of specific charge to have been noted by the office of SubRegistrar on the said property till the First Appeal is finally adjudicated. Person in whose favour solvency certificate is issued was solvent on the day certificate is issued, however, security offered for so stating requires to be secured, lest the same would not be available if eventually refund is directed and hence, charge shall be created in the name of Registrar, District Court, for such purpose.
Necessary direction in this regard be issued for completing such requirement. On completing such proceduralities, necessary document reflecting the charge over the property when is produced, the amount as directed by the appellate Court shall be permitted within 12 weeks from the date of receipt of this order. Petition is disposed of accordingly.
(Ms.Sonia Gokani, J.) sudhir