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'Abuse Of Process, Frivolous Litigation' : Supreme Court Affirms Cost Of Rs 5 Lakhs Imposed On Litigant

Mehal Jain
28 Jun 2022 7:26 AM GMT
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Quoting its earlier observations about how "the Indian judicial system is grossly afflicted with frivolous litigation" and how "a new creed of litigants has cropped up which does not have any respect for truth", the Supreme Court has said that the Bombay High Court's imposition of Rs. 5 lakhs cost on a lady aged 78 was "absolutely justified" in view of her "consistent effort to abuse the process of law as well as the process of Court".

Strongly criticising the filing of numerous proceedings before the tiers of forums upto the Supreme Court itself and the deliberate non-disclosure of absolutely relevant facts, the Apex Court went on to record that it was initially persuaded to initiate contempt proceedings against the Petitioner, but it is not doing so purely due to the age of the Petitioner as she is a lady of 78 years of age.
The bench of
Justices C.T. Ravikumar and Sudhanshu Dhulia
was hearing the SLP against the June 13 decision of the Bombay High Court dismissing the petitioner's appeal with a cost of Rs. 5 lakhs. Through the appeal before the High Court, she had challenged the May order of the Trial Court by which her 2022 suit for a stay of the auction under the SARFAESI was dismissed as the defendants' application under Order VII Rule 11 of the C. P. C. for rejection of the plaint was allowed.
The facts, as recorded by the top court are, that petitioner had availed credit facility from the Oriental Bank of Commerce, Mumbai and had outstanding dues running approximately to the tune of Rs. 277,00,00,000/-. The Bank ultimately moved an application before Debts Recovery Tribunal for recovery of its dues from the present petitioner and others. This original application was allowed by the DRT, Mumbai on 24.07.2006 and consequently recovery certificate was issued and the borrowers and guarantors were directed to repay the outstanding dues. The order dated 24.07.2006 was challenged before the Debts Recovery Appellate Tribunal and so were several other orders and measures which were subsequently taken by the Bank for the recovery of the amount under the provisions of the SARFAESI Act. On 30.09.2013, the Bank had assigned the debts concerning the present dispute as well as the underlying securities in favour of M/s. Phoenix A.R.C. Pvt. Ltd., the secured creditor. Thereafter, a settlement took place between the present petitioner and M/s. Phoenix A.R.C. Pvt. Ltd. and a settlement deed was signed between the parties on 01.10.2013. The present petitioner was a signatory to the said settlement wherein the petitioner undertook to repay M/s. Phoenix A.R.C. Pvt. Ltd. a sum of Rs. 27,31,04,000/- on or before 30.09.2014. The petitioner also agreed to handover the possession of the secured asset to M/s. Phoenix A.R.C. Pvt. Ltd. The petitioner also gave an undertaking not to obstruct execution in case of the recovery certificate which may be issued in case of default of consent terms. All the same, the petitioner failed to repay the amount or even handover the possession of the secured asset to M/s. Phoenix A.R.C. Pvt. Ltd. Not only this, in clear breach of the consent terms and the settlement dated 01.10.2013, attempts were being made by the petitioner in obstructing the execution of the recovery certificate by filing numerous proceedings before the authorities under the SARFAESI Act as well as before the Bombay High Court and the Supreme Court of India. The Supreme Court noted the long list of cases filed by the petitioner before the DRT and the District Court as well as the Bombay High Court and the top court.
The bench of Justices Ravikumar and Dhulia remarked, "We have already narrated the long list of dates and the number of cases which have been filed by the Petitioner. We have also been apprised by Mr. Kavin Gulati, learned senior counsel, appearing for Respondent Nos. 1 and 2 herein and Mr. Huzefa Ahmadi, learned senior counsel appearing for the Respondent No.4 herein that the total number of SLPs which have been filed before this Court by the Petitioner are as follows...These petitions were either dismissed or withdrawn. In some of these petitions the plea of fraud and collusion at the hands of Respondent Nos. 1, 2 and 4 with the secured creditor was raised and then the petitions were consequently withdrawn. It was again an unconditional withdrawal. Therefore, the Petitioner cannot be permitted to raise the same plea again by filing the present petition. All the same, the same plea has been taken now in the present case as well. What is most regrettable is that the Petitioner has not mentioned the filing of most of the SLPs in the present SLP before this Court..."

"Regretfully, as we have already observed, there is no reference made by the Petitioner of the earlier SLPs filed by the Petitioner, which as we have noted either stood dismissed or were withdrawn by the Petitioner. We, therefore, have no hesitation to say the petitioner has not approached this Court with clean hands. To the contrary there has been a consistent effort to abuse the process of law as well as the process of Court...Under the facts and circumstances of the case, the Bombay High Court was absolutely justified in imposing the cost of Rs. 5 lakh, on the Petitioner. It is not only the proceedings before the Civil Court initiated by the Petitioner in the year 2022 which was on abuse of the law, but the entire conduct of the petitioner is a clear reflection of the fact that the petitioner has been doing so repeatedly, after being a signatory to the settlement as back as 01.10.2013",
commented the bench.
The bench quoted what the Supreme Court in Dalip Singh v. State of Uttar Pradesh has to say for methods adopted at the hands of litigants under similar circumstances- "For many centuries, Indian society cherished two basic values of life i.e., `Satya' (truth) and `Ahimsa' (non-violence)...Truth constituted an integral part of justice delivery system which was in vogue in pre- independence era and the people used to feel proud to tell truth in the courts irrespective of the consequences...In the last 40 years, a new creed of litigants has cropped up. Those who belong to this creed do not have any respect for truth. They shamelessly resort to falsehood and unethical means for achieving their goals. In order to meet the challenge posed by this new creed of litigants, the courts have, from time to time, evolved new rules and it is now well established that a litigant, who attempts to pollute the stream of justice or who touches the pure fountain of justice with tainted hands, is not entitled to any relief, interim or final"

The bench of Justices Ravikumar and Dhulia proceeded to declare that though it was "initially persuaded in this case, to initiate contempt proceedings against the Petitioner, considering that there has been a deliberate attempt on her part in the non-disclosure of absolutely relevant facts before this Court", it is "not doing so purely due to the age of the Petitioner as she is a lady of 78 years of age".
Moreover, the bench stated that the present petition is no doubt an abuse of the process of law and has caused harm to the other parties to the litigation, some of whom may have been needlessly drawn into the litigation.
The bench even referred to the following observation given by the Supreme Court in the case of Subrata Roy Sahara v. Union of India- "The Indian judicial system is grossly afflicted, with frivolous litigation. Ways and means need to be evolved, to deter litigants from their compulsive obsession, towards senseless and ill-considered claims. One needs to keep in mind, that in the process of litigation, there is an innocent sufferer on the other side, of every irresponsible and senseless claim. He suffers long drawn anxious periods of nervousness and restlessness, whilst the litigation is pending, without any fault on his part".

"So much for the conduct of the Petitioner, but before, we come down to the other relevant aspects of the matter, let us examine the pure merits of the case as submitted before this Court by the learned Counsel", said the bench of Justices Ravikumar and Dhulia. It noted that the advocate for the petitioner would argue that the suit was maintainable before the Trial Court and was not liable to be dismissed on an application under Order VII, Rule 11 for the simple reason that there was no bar under Section 34 for the present case as the Plaintiff/Petitioner has alleged fraud at the hands of Respondent Nos. 1, 2 and 4 who were in connivance with the secured creditor.
"Indeed, though Section 34 removes the jurisdiction of Civil Court for entertaining the matter which is subject of the SARFAESI Act, an exception has been carved out in the case of fraud, by the Apex Court, in the case of Mardia Chemicals Ltd...A mere recital of fraud, however is not enough. Once fraud is alleged by a party, like the one that has been done by the Petitioner in reply to the objection under Order VII, Rule 11 of the Civil Procedure Code, then the allegation of fraud has to be tested in terms of Order VI, Rule 4 of the Civil Procedure Code...",
observed the bench.
The bench continued to note, "Apart from making a bald statement of collusion between Defendant Nos. 1, 2 & 4 and the secured creditor, i.e., M/s. Phoenix A.R.C. Pvt. Ltd. there is nothing substantial as to how and as to what precise fraud has been committed. The only case of the Petitioner for creating a case of fraud is that the Petitioner's name was not registered as a member of the society and the reason for not registering the name of the Petitioner as a member of the society was that the society, i.e., Defendant No.3 was in collusion with the secured creditor as well as with the Defendant Nos.1, 2 and 4. The fact of the matter is that even if the name of the Petitioner would have been registered as a member of the society, it would have hardly given any benefit to the Petitioner in the present case. Being registered as a member of the society would have only meant that the petitioner is a member of the society. It would not create ownership rights on a property. Moreover, and most importantly, not only is this just a bald allegation but the necessary party against whom fraud was alleged i.e., M/s. Phoenix A.R.C. Pvt. Ltd. was never made a party in the suit proceedings before the Civil Court".

The bench concluded that it is totally in agreement with the above observations of the two courts and the order passed by the trial court allowing the application under Order VII, Rule 11 of the C. P. C. and the Bombay High Court order of 13.06.2022 and upholding that order and dismissing the appeal of the present Petitioner.
Case Title: CHARU KISHOR MEHTA v. PRAKASH PATEL & ORS.

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