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J.c. Khosla v. Khosla Medical Institute And Research Society

J.c. Khosla
v.
Khosla Medical Institute And Research Society

(High Court Of Delhi)

Interim Application No. 7614 of 1994, Suit Appeal No. 1336 of 1994 | 15-05-1996


MANMOHAN SARIN (ORAL), J.

(1) THIS is plaintiffs application under order 39 Rule 2-A CPC, for proceedings against respondents Nos. 1 and 2, who were defendant Nos. 2 and 4 in the suit, and against respondent Nos. 3,4 and 5, who have been impleaded in the present application, for disobedience of the injunction granted on 22-6-1994.

(2) THE plaintiff had filed a suit for decree of declaration, claiming that the suit property was a public trust property. In the event, leave under Section 92 of the Code of Civil Procedure had been refused and the plaint was rejected. However, the plainiff alleges violation of the restraint order passed on 22. 6. 94. The said order reads as under:-

I. A. 6386/94 Notice. In the meantime, the respondents are restrained from transferring or alienating or disposing of or creating any third party interest in Khosla Hospital, Shalimar Bagh,west Delhi. Order 39, Rule 3 be complied with. DASTI.

(3) THE plaintiffs case may he briefly slated. The plaintiff claims that the respondent /contemnor Nos. 1 and 2 have, after the passing of the order and its communication, transferred the "khosla Hospital" i. e. property in suit, to contemnor Nos. 3,4 and 5 along with the management of Defendant society. The respondent/contemnors 3,4 and 5, who were not parties to the suit are claimed to have been informed of the order passed by the Court on 25. 6. 94. Learned counsel submits that respondent Nos. 3,4 and 5 would be equally liable for the contempt inasmuch as having been informed of the order, they have aided and abetted the contempt. Learned counsel relies on Vidya Charan Shukal Vs. Tamil Nadu Olympic Association reported at AIR 1991 Madras 323, wherein it was held that if a third party or a stranger aids or abets the violation with notice or knowledge of the order of injunction, he could be guilty of civil contempt.

(4) THE plaintiffs allegation against respondent Nos. 1 and 2 is that they have transferred the trust property by induction of new members in the society. Alternatively, counsel urged that if for some reason the Court was to hold that there was no transfer of the properties of the trust or of the hospital, this was d case of creation of a third parly interest. The plaintiff/applicant has placed on record details of the alleged resolutions by which 34 new members were added to the General Body of the societyand 6 new members were added to the existing 5 members of the governing body, who are also referred to as Board of Directors, making a total of 11 members of the governing body.

Learned counsel argued that the contemnors/respondent Nos. 1 and 2 had in fact transferred the property of the hospital to contemnor Nos. 3,4 and 5 for a consideration of Rs. 4. 50 crores. He submits as a result of this transaction, the respondent Nos. 3,4 and 5 have taken over the hospital and the society and are controlling the same. It is urged by him that Respondent No. 3 contemnor, in fact, has paid to a creditor of the society, namely, industrial Credit and Investment Corporation of India a sum of Rs. 2. 5 crores on behalf of the society from his own funds. This respondent No. 3 would not have so done, had he not acquired interest in the properties of the society. Learned counsel states that the respondent Nos. l and 2 have also given an indemnity agreeing to indemnify the respondent contemnors Nos. 3 to 5 against any threatened legal action by the plaintiff. There would have been no occasion for the respondent Nos. 1 and 2 to give this indemnity, if there was no transfer. The indemnity has been given because respondent Nos. 1 and 2, received consideration for the transfer

(5) LEARNED counsel for the plaintiff further argued that the Delhi Development Authority was in these circumstances constrained to cancel the lease of the trust property on the ground that there has been a transfer in favour of "maharishi Ayurveda. " the name under which respondent Nos. 3 to 5 were running the hospital. Learned counsel for the plaintiff also submitted that the Income tax authorities have been constrained to cancel the registration granted to the society as a charitable institution making donations to it exigible to tax.

(6) LEARNED counsel for the plaintiff also relics on an affidavit of a property broker filed by the plaintiff to the effect that the transfer was on a consideration of Rs. 4. 5 crores. He further relies on another affidavit by one Mr. V. S-Anand wherein it is stated that the Respondent Nos. 3-5 are running and controlling the administration of the hospital.

Mr. Gambhir further submits that the respondent Nos. 1 and 2 had even taken out advertisements for sale of the property. The said advertisements have been filed alongwith the plaint. The present transaction was just a culmination of that effort. Mr. Gambhir submitted that the respondent Nos. l and 2 have manipulated and tempered with the records of defendants society in an attempt to show that the transaction had taken place prior to restraint order. He argued that the resolution dated 15-4-1995 appears at pages 40 to 41 of the Minute Book while a later resolution of 2-5- 1994 appears at pages 38 to 39 of the Minute Book.

(7) MR. Gambhir argued that this was a fit case where the Court should lift the corporate veil and look at the real nature of the transaction. He submitted that this was a case where the respondents/contemnors have acquired the property by becoming member of the General Body as well as the Governing Body of the society. Learned counsel relied on the observations made by the Apex Court, in DDA Vs. Skipper Construction Pvt. Ltd. reported at J. T. (1996) 4 S. C. C. 679. He, therefore, prayed that the respondents/contemnors should be punished for the disobedience of the injunction order.

(8) LEARNED counsel for respondent Nos. 1 and 2, Mr. Sanjay Karol, refuted the allegations made. He submitted that the instant case is really an off-shoot of acrimonious litigation that had been going on between the members of the Khosla family. Respondent No. 2 happens to be the elder brother of the plaintiff. Apart from the present litigation, it is stated that there are six civil suits ,two criminal complaints filed by the plaintiff. The present litigation is only a sequel to the same. Mr. Karol submitted that it is not the case of the plaintiff that there has been any contravention of the Rules and Regulations governing the Society. The plaintiff has simply alleged that there has been a transfer of the assets of the society for a surreptitious consideration, which is non existent.

Mr. Karol submits that the factual position was that the society had not been functioning well and had reached a stage of acute financial crisis. More funds were needed to be pumped into the society and the hospital to prevent complete attrition of the investment already made. It was in these circumstances, that Respondent Nos. 3- 5, who displayed interest in contributing to this philanthropic venture, were inducted as members of the society and also made members of the governing body. Mr. Karol submits that there has been no transfer or sale in favour of the respondent Nos. 3-5. There is no creation of a third party interest. The society continues to own its property. As a result of the induction of Respondent No. 3-5and their group, badly needed funds for the society were made available. A sum of Rs. 2. 5 crores was paid to the Industrial Credit and Investment Corporation of India. The hospital has become functional. Further the system of "ayurveda" has been introduced in a wing of the hospital to provide cheap and speedy treatment, to the masses.

(9) MR Karol submits that Respondent No. 1 continues to be the Chairman of the society and Respondent No. 2 continues to be the Director of the society. As for the cancellation of the lease deed by the Delhi Development Authority, the same has been stayed by this Court. Mr. Karol disclaimed any knowledge about the deregistration by the Income tax authorities.

(10) LEARNED counsel for respondent Nos. 3-5 submits that the respondent Nos. 3 to 5 had been inducted as members prior to the passing of the order in April, 1996 itself. It is not necessary to go into the controversy regarding manipulation of records.

(11) THE short question that arises for my consideration is whether there has been any willful disobedience of the order dated 22-6-1994, by the respondent Nos. 1 and 2 and whether respondent Nos. 2 to 5 have aided and abetted the same The plaintiff does not dispute that the property and hospital continues to be owned and run by the society. The plaintiffs case is that by induction of respondent Nos. 3 to 5 and their associates, the control of the society has been taken over by them which amounts to a transfer or creation of a third party interest. I am unable to accept this contention of the plaintiff. The net result of the transaction complained is that of the respondent Nos. 3 to 5 have become members of the society and member of the Governing Body. There is no transfer of any asset of the society or of the Hospital in favour of the respondents or their associated individually or in favour of any third party. The assets continue to be owned by the society. It is a different matter that respondent Nos. 3 to 5 have been inducted to provide funds or give strength to the management of the Society or for that matter they may have even taken control of the management. It would be pertinent to notice here that respondent Nos. I and 2 continue to be the Chairman and director of the hospital. Similarly, there would be no transfer of interest in favour of third parly by additional members being inducted in the Governing Body. I am accordingly, not persuaded to hold that this is a case of transfer or alienation of properly or creation of third parly or interest. Respondent Nos. 3 to 5 do not claim any ownership or interest in the property dehors the capacity as members of the society.

(12) AS regards the submission of Mr. Gambhir that on principle analogous to the lifting of corporate veil, the transaction should be viewed and the interest of respondent Nos. 3 to 5 determined. The ease cited by the counsel for plaintiff at the bar DDA Vs. Skipper Construction Pvt. Ltd. Supra is completely distinguishable on facts. I am afraid that the present case is not one where the principle applicable for lilting of the corporate veil, can he applied. The principle for lilting of corporate veil are well settled. It is in cases where the Court finds that corporate entity is really a facade for an illegal or improper purpose and it is in public interest to do so the Court moves in to lift the corporate veil. The present litigation appears to he a extension of a family feud. The principle of lifting of corporate veil cannot be allowed to be used to enable parties to settle personal scores.

In view of the foregoing discussion, I am of the view that there has been no willful disobedience of the order dated 22-6-1994. The contempt notice is discharged and the application is dismissed. Parties to bear their own costs.

Advocates List

For the Appearing Parties A.C. Gambhir, Manoj Arora, Sanjay Karol, Advocates.

For Petitioner
  • Shekhar Naphade
  • Mahesh Agrawal
  • Tarun Dua
For Respondent
  • S. Vani
  • B. Sunita Rao
  • Sushil Kumar Pathak

Bench List

HON'BLE MR. JUSTICE MANMOHAN SARIN

Eq Citation

1996 3 AD (DELHI) 109

1996 (37) DRJ 654

LQ/DelHC/1996/499

HeadNote

Civil Procedure Code, 1908 — S. 92 r/w Or. 39 R. 2-A and Or. 39 R. 3 — Contempt — Lifting of corporate veil — Held, not applicable to settle personal scores — Contempt application dismissed