High Court of Bombay at Goa Sets Aside Appellate Court Order Cancelling Sale Deed for Violating Natural Justice — Affected Third Party Not Heard. Cancellation of Sale Deed and Tri-partite Lease Deed on Injunction Appeal Reversed for Want of Impleadment of Purchaser.

Writ Petitions under Article 227 of the Constitution of India challenging orders passed in a civil suit, wherein the Appellate Court cancelled the registration of a sale deed and lease deed of a company's factory shed without hearing the third-party purchaser, and the Trial Court struck off the defendants' defence based on that order.

In WP 279/2006, the third-party purchaser (Defendant No.3) sought quashing of the order cancelling registration of the Sale Deed and Tri-partite Lease Deed. In WP 362/2006, the Company and its Managing Director (Defendants) sought quashing of the same order. In WP 626/2006, they sought quashing of the order striking off their defence.

The Appellate Court passed an order prejudicial to Defendant No.3 without hearing him, and exceeded its jurisdiction by cancelling registered documents. The Trial Court struck off the defence without an independent inquiry, solely based on the Appellate Court's findings.

Trial Court dismissed temporary injunction application on 12.04.2005; Appellate Court allowed appeal on 28.10.2005, cancelling registration of documents and granting injunction; Trial Court by order dated 26.09.2006 struck off defence under Order 39 Rules 11 and 2A CPC.

Whether the Appellate Court's order dated 28.10.2005 cancelling registration of the Sale Deed and Tri-partite Lease Deed without hearing Defendant No.3 is sustainable under natural justice and law? Whether the Trial Court's order dated 26.09.2006 striking off the defence under Order 39 Rules 11 and 2A CPC solely on the basis of the Appellate Court's findings is legally valid?

Petitioner in WP 279/2006 argued that the Lower Appellate Court was legally obliged not to pass any order prejudicial to his interest behind his back and that it exceeded its jurisdiction in directing cancellation of registered documents. Petitioners in WP 362 and 626/2006 contended that the Plaintiff had been validly disqualified as a Director under Section 283(1)(g) of Companies Act, 1956, and the sale was validly executed; further, the order striking off defence was passed without inquiry. Respondent/Plaintiff submitted that the Appellate Court correctly found that the Plaintiff had not been validly disqualified, notices were not properly served, and the sale was executed in breach of the ex-parte ad-interim injunction order, justifying cancellation.

An order affecting the rights of a person cannot be passed without affording an opportunity of being heard; the Appellate Court acts without jurisdiction if it grants substantive relief such as cancellation of registered documents in an injunction appeal without trial. A Trial Court cannot strike off a defence under Order 39 Rules 11 and 2A CPC solely on the findings of another court without conducting its own inquiry.

The Lower Appellate Court has exceeded its jurisdiction in directing the cancellation of the registration of the Deed of Sale dated 09.03.2004 and the Tri-partite Lease Deed dated 16.04.2004 executed in favour of the Petitioners. I find that admittedly defendatn no. 3 was not a party to the Appeal preferred before the Appellate Court. The relief of cancellation of registration essentially affects the rights of the defendant no. 3. In such circumstances, before directing the cancellation of the registration, the learned Judge ought to have heard the defendant no. 3 in the matter.

The Plaintiff filed Regular Civil Suit No.69/2004 in the Court of Civil Judge, Senior Division, Mapusa, seeking a declaration that he is a Director of the Company and for permanent injunction restraining alienation of assets. An application for temporary injunction under Order 39 Rules 1 and 2 CPC was dismissed on 12.04.2005. The Plaintiff appealed to the Additional District Judge in Misc. Civil Appeal No.46/2005. During the pendency, the Company sold the suit shed to a third party via Sale Deed dated 09.03.2004 and Tri-partite Lease Deed dated 16.04.2004. The Appellate Court, by order dated 28.10.2005, allowed the appeal, cancelled the registration of these documents, and granted temporary injunction. Defendant No.3 was not impleaded in the appeal. Later, the Plaintiff filed applications under Order 39 Rules 11 and 2A CPC alleging violation of an ex-parte ad-interim order dated 06.04.2004. The Trial Court, by order dated 26.09.2006, struck off the Defendants' defence solely based on the Appellate Court's findings. Aggrieved, the Defendants and the third-party purchaser filed Writ Petitions Nos. 279/2006, 362/2006 and 626/2006 before the High Court, which were heard together and decided by common judgment.

• Companies Act, 1956: 283(1)(g)
• Code of Civil Procedure, 1908: Order 39 Rules 1, 2, 11, Order 39 Rule 2A