Unregistered Guarantee, Undertaking Cannot Protect Property From Attachment: Madras High Court In Sun TV's Plea

The Madras High Court has recently held that Sun TV Network Limited could not claim protection from attachment based on an unregistered guarantee and undertaking.

The court dismissed its application to release properties attached in proceedings initiated by Marina Holdings against N. Ramasamy, proprietor of Sri Thenandal Films.

Justice K. Kumaresh Babu observed that Section 64(2) of the Code of Civil Procedure, 1908, requires the relevant contract for transfer or delivery to be registered before attachment to qualify for the statutory exception.

“It is true that a pre-existing right before an order of attachment can aid the benefit of holder of such pre-existing right over the order of attachment. But, however, Section 64 mandates that such a contract of transfer or delivery entered should have been registered before the attachment. Admittedly, in the present case, the deed of guarantee or the undertaking which are the relevant documents that have been claimed to vest a pre-existing right to the applicant are not registered documents.”, the court ruled.

The dispute arose from agreements concerning the Vijay-starrer Sarkar. Vijay is currently the Chief Minister of Tamil Nadu. Under the agreements, Ramasamy was liable to pay ₹80 crore to Sun TV.

Following the dispute, Ramasamy, his wife, and his sisters executed a guarantee and undertaking agreeing to encumber 11 immovable properties in Sun TV's favour.

Sun TV initiated proceedings under Section 9 of the Arbitration and Conciliation Act, 1996. The parties entered into a joint compromise, which the High Court recorded on November 23, 2018. They agreed to execute sale deeds in Sun TV's favour.

Marina Holdings separately initiated proceedings against Ramasamy. On March 12, 2020, the High Court ordered attachment of the properties after Ramasamy failed to furnish security. A further attachment order passed during arbitration was registered with the jurisdictional Sub-Registrar on September 10, 2020.

Sun TV purchased the properties through registered sale deeds in 2021. The parties also entered into a fresh compromise on September 23, 2021, in proceedings seeking to set aside the earlier compromise.

It approached the High Court seeking release of the attached properties. It argued that its rights arose from the 2018 guarantee and compromise, which predated Marina Holdings' attachment.

Sun TV also relied on an arbitral award directing Ramasamy to hand over possession of the residential properties. It told the court that it had obtained possession through separate execution proceedings.

Marina Holdings opposed the application, arguing that the unregistered guarantee and undertaking could not establish enforceable pre-existing rights. It also pointed out that the attachment had been registered before Sun TV purchased the properties.

One of the signatories had challenged the earlier compromise on allegations of fraud and forgery. During those proceedings, the documents were sent for forensic examination, and an Advocate Commissioner was appointed.

The parties subsequently entered into a fresh compromise, on the basis of which the applications seeking recall of the earlier orders were disposed of.

“The conduct of the parties in those proceedings would only indicate that the earlier Joint Memo of Compromise in the year 2018, upon which initial Section 9 applications which were disposed of were never acted upon and only based upon the subsequent Joint Memo of Compromise Sale Deeds have been executed and it is pertinent to note that the second Joint Memo of Compromise that had been entered between the parties therein was subsequent to the order of attachment.”

The court observed that the parties had not acted on the 2018 compromise. The sale deeds were executed based on the subsequent compromise, which came after the attachment.

It further held that entering into the fresh compromise amounted to giving up Sun TV's claim based on the initial settlement. The earlier compromise, therefore, could not establish pre-existing rights entitling Sun TV to protection against the attachment.

The court dismissed Sun TV's application seeking release of the attached properties, with no order as to costs.

For Applicant (Sun TV Network Limited): Advocate Jose John, for King & Partridge.

For Respondent (Marina Holdings): Senior Advocate K. Ravi, for Rugan & Arya.