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Fairgrowth Financial Services Ltd. v. Custodian & Anr.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 5471 of 2005)Decided 10 Aug 2015
Civil Appeal No. 5471 of 2005
Justice Vikramajit Sen · Justice Shiva Kirti Singh

Background

The appellant, a company notified under the Special Courts Act for its role in the securities scam, held tenancy rights over a flat in Mumbai that were attached to satisfy its liabilities. The landlord (respondent no. 2) applied to the Special Court to have the tenancy rights disposed of for the best price, and after a public advertisement drew no competing offers, the Special Court accepted the landlord's offer of Rs. 75 lakh and directed the appellant to hand over vacant possession. The appellant appealed, arguing it had no outstanding liabilities requiring disposal of the tenancy rights, and a connected pair of appeals challenged earlier related orders of the Special Court.

Decision Breakdown

The Supreme Court found the appellant's argument that it had no outstanding liabilities to be without merit and upheld the Special Court's order disposing of the tenancy rights. As a goodwill gesture during the hearing, the landlord's director offered in open court to deposit an additional Rs. 10 lakh plus accrued rental income of about Rs. 3.92 lakh on top of the originally ordered Rs. 65 lakh balance, bringing the total consideration to Rs. 78,92,000, with eight weeks to pay. The Court dismissed the main appeal but modified the order to incorporate this enhanced payment, directed the Custodian to hand over possession to the landlord within one week of the deposit, and dismissed the connected appeals (Nos. 5788-5789 of 2005) concerning the same subject matter as well, with no order as to costs.

Lesson Learnt

In recovery/attachment proceedings, a court can accept and formalize a voluntary enhanced settlement offer made at the hearing to increase the amount recovered for creditors, even while otherwise upholding the lower court's order on the core dispute.

Official source (sci.gov.in)View Judgment (PDF)

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