Delhi High Court

Reserve Bank Of India vs M/S. Jvg Finance Ltd. on 23 August, 2011

Author: Manmohan

32
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*       IN THE HIGH COURT OF DELHI AT NEW DELHI

+       CO.PET. 265/1998


        RESERVE BANK OF INDIA                     ..... Petitioner
                        Through                   Ms. Swati Setia, Advocate
                 versus

        M/S. JVG FINANCE LTD.                     ..... Respondent

Through Mr. Rajiv Bahl and Mr. Manish Bishnoi, Advocates for Official Liquidator.

Mr. Rajesh Kumar, Advocate for Mr. Shailendra Singh, Advocate for Mr. V.K. Sharma, ex-Director.

Mr. P. Nagesh, Advocate with Mr. Anand M. Mishra, Advocate for applicants.

%                                           Date of Decision: 23rd August, 2011

CORAM:
HON'BLE MR. JUSTICE MANMOHAN

1. Whether the Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not? Yes.

3. Whether the judgment should be reported in the Digest? Yes.

MANMOHAN, J : (Oral)

Co. Appl. 1634/2011

Keeping in view the averments in the application, delay in filing

Co. Appl. 1633/2011 is condoned.

Accordingly, application stands disposed of.

Co. Appl. 1633/2011

Present application has been filed under Section 536(2) of the

Companies Act, 1956 (for short 'Act') after the applicant received 132nd

Report of Mr. J.P. Aggarwal, the One Man Committee, appointed by this

Court, to verify the claimant's rights in relation to plots situated at JVG

Hills Layout, Kondapur Village, Hyderabad, Andhra Pradesh.

The facts of the present case are that the applicant in pursuance to

an advertisement issued by the JVG Group in the year 1995 booked and

was allotted a plot bearing No. F-201, JVG Hills Layout Kondapur

Village, Hyderabad, Andhra Pradesh. Applicant made payments of

` 31,100/- with JVG Finance and ` 30,0910/- with JVG Projects before

05th June, 1998, the date of appointment of the Provisional Liquidator.

The One Man Committee has found that the claimant has deposited

only a sum of ` 61,290/- towards the sale consideration and other charges

whereas the applicant claimed that it had additionally deposited a sum of

` 1,00,580/- in cash. The Committee has also found that the applicant had

failed to place on record any receipt of the aforesaid cash payment.

However, it is an admitted position that in the present case the sale

deed had been executed by an alleged authorised representative of JVG

Finance Limited after 05th June, 1998 i.e. after the date of appointment of

the Provisional Liquidator.

The One Man Committee appointed by this Court rejected the

applicant's claim. The relevant portion of the order reads as under:-

" xxx xxx xxx

That in the present case on the petition filed by the RBI for winding up of the company namely M/s. JVG Finance Ltd. the Hon'ble Court appointed a Provisional Liquidator vide order dt. 05/06/1998. All the properties and effects of the company vested in the custody and control of the official liquidator w.e.f. 05/06/1998. Sections 536(2) and 537(1)(b) of the Companies Act, 1956 provide that in the case of a winding up by the court any disposition of the property made after the commencement of the winding up, shall, unless the Hon'ble Court otherwise orders, be void and any sale held, without leave of the Hon'ble Court of any of the property or effects of the company after the commencement of the winding up shall be void.

Sh. V.K. Sharma, Ex-Chairman of JVG Group of Companies in his affidavit dt. 18/03/2009 has stated that the JVG Group acquired 80 acres of land in Sy No. 92 to 97 and 189 in village Kondapur for which the entire sale consideration was paid by the JVG Group. Ld. Counsel for Sh. V.K. Sharma told the Hon'ble Court on 27/11/2010 that the properties purchased in different names like of M/s. JVG Finance Ltd, M/s. JVG Housing Finance Ltd., M/s. JVG Farm Fresh Ltd. and M/s. JVG Hotels Ltd. etc. belong to M/s. JVG Finance Ltd. and Sh. V.K. Sharma has no objection to the sale of these properties. It clearly shows that the land purchased by M/s. JVG Finance Ltd. in the names of M/s. JVG Housing Finance Ltd. and M/s. JVG Farm Fresh Ltd. etc. has to be treated at par with the land belonging to M/s. JVG Finance Ltd. (In Liqn.). This land cannot be treated as excluded from the liquidation proceedings.

Sh. V.K. Sharma further stated that after the appointment of

provisional liquidator on 05/06/1998 the acts of Col. Ganapathy had already come to an end. Col. Ganapathy went on committing frauds when he went on selling the plots in Hyderabad after 1998. He had no authority to sell or alienate any of the properties of JVG. All his averments that he was not aware of the order till 2002 is false. Col. Ganapathy appeared before the committee on 11/12/2007 and admitted that he came to know of liquidation in September, 1998 yet he continued to sell the plots in utter violation of the provisions of the Companies Act. In view of these circumstances his averment that he came to know about liquidation only in September 1998 cannot be considered trustworthy.

That so far as the agreement to sell is concerned, it is stated that it was entered into between the parties before the commencement of winding up of the company, but till 05/06/1998 neither the entire the sale consideration was paid by the vendee nor sale deed was executed in her favour. Moreover, the agreement does not itself create any interest or charge on the property. The vendor accepted the part sale consideration and executed the sale deed after 05/06/1998 without the leave of the Hon'ble Court. Hence, the sale is void U/s 537(1)(b) of the Companies Act.

That from the facts stated above it is quite clear that after 05/06/1998 Col. M.J. Ganapathy had no authority to receive any amount towards sale consideration and execute a sale deed in respect of plot No. F-201 measuring 234 Sq. yds. in favour of Smt. Chamundeshwari Krupeswara without the leave of the Hon'ble Court. Hence the sale deed executed on 04/07/1998 by Col. M.J. Ganapathy in favour of Smt. Chamundeshwari Krupeswara in invalid.

The claim of Smt. Chamundeshwari Krupeswara is disposed of with the following observations.

a) That the claimant shall not be entitled to allotment of plot no. F-201 measuring 234 Sq. yds.

b) That the claimant shall be entitled to the refund of Rs.61,290/- with interest as may be fixed by the court.

OR The claimant shall be entitled to the proportionate amount as may be found payable.

The claim of Smt. Chamundeshwari Krupeswara is, accordingly, disposed of.

It is pertinent to mention that this Court while appointing the

Provisional Liquidator on 05th June, 1998 ordered as under:-

" xxx xxx xxx

On consideration of the averments made in the present application, I am satisfied that there are sufficient grounds in the present case for appointment of a Provisional Liquidator. Accordingly, I appoint the Official Liquidator who is attached to this Court as the Provisional Liquidator, who shall take charge of all the assets and properties of the company along with the books of accounts and other records of the company.

The Provisional Liquidator shall take immediate custody of all the assets as directed, if necessary shall also seek police assistance in executing the aforesaid order. The Provisional Liquidator will be entitled to seek assistance of a firm of Chartered Accountants in compilation of the accounts of the respondent company.

Till the next date, the respondent, its directors, servants and agents are restrained from disposing of, alienating and/or parting with possession of any of the assets of the company.

Dasti."

(emphasis supplied)

Further, it is submitted on behalf of Reserve Bank of India that

vide order dated 18th October, 1997 the Reserve Bank of India had

prohibited the company in liquidation from accepting deposits or

alienating any assets without prior written permission of the Reserve

Bank of India except for the purpose of repayment of deposits.

Keeping in view the aforesaid order dated 05th June, 1998

appointing the Provisional Liquidator as well as the fact that certain cash

payments are alleged to have been made by the applicant, which are not

reflected in the balance sheet of the company, it is the considered opinion

of this Court that the impugned sale deed has been executed only to

defeat the rights of the creditors of the company in liquidation. It is a

settled law that this Court will not allow the assets of a company in

liquidation to be disposed of at the pleasure of the company and thus

cause the fundamental principle of equality amongst the creditors to be

violated.

In fact, the Apex Court and the different High Courts have

consistently taken the view that execution of any sale deed in

disobedience of an interim order of the Court is a nullity. Some of the

relevant judgments are reproduced hereinbelow:-

(i) In Krishna Kumar Khemka vs. Grindlays Bank P.L.C. (1990) 3 SCC 669, it has been held as under:-

"16. .....Therefore the tenancy created in favour of the Tatas was in breach of the order of the Court and consequently the Tatas cannot claim any protection under the provisions of the Act and they are liable to be evicted. ......In any event as observed

above, the new tenancy created in their favour contrary to the orders of the Court does not create a right and is liable to be cancelled....."

(ii) In Satyabrata Biswas vs. Kalyan Kumar Kisku, (1994) 2 SCC 266¸ it has been held as under:-

"29. ...... Hence, the grant of sub-lease is contrary to the order of status quo. Any act done on the teeth of the order of status quo is clearly illegal. All actions including the grant of sub-lease are clearly illegal....

xxx xxx xxx

31. The parties are relegated to the position as on 15-9-1988. Somani Builders are hereby directed to deliver vacant possession to the Special Officer within one month from today...."

(iii) In Surjit Singh vs. Harbans Singh, (1995) 6 SCC 50, it has been

held as under:-

"4. ....In defiance of the restraint order, the alienation/assignment was made. If we were to let it go as such, it would defeat the ends of justice and the prevalent public policy. When the court intends a particular state of affairs to exist while it is in seisin of a lis, that state of affairs is not only required to be maintained, but it is presumed to exist till the Court orders otherwise. The Court, in these circumstances has the duty, as also the right, to treat the alienation/assignment as having not taken place at all for its purposes....."

(iv) In Savitri Devi vs. Civil Judge, Gorakhpur, AIR 2003 Allahabad

321, it has been held as under:-

"10. .....It is settled legal proposition that sale deeds so executed are a nullity as having been executed in disobedience of the interim order of the Court. In Mulraj v. Murti Raghunathji Maharaj, AIR 1967 SC 1386, the Hon'ble Supreme Court considered the effect of action taken subsequent to passing of an interim order in its disobedience and held that any action taken in disobedience of the order passed by the Court would be illegal, subsequent action would be a nullity.

xxx xxx xxx

12. Therefore, there is no doubt that the alleged sale deeds are nullity, meaning there-by non est, unenforceable and in executable and deserve to be ignored.

xxx xxx xxx

28. To sum up the case, the sale deeds allegedly executed by the respondent No.3 in favour of respondent Nos. 4 to 6 are nullity as had been executed in disobedience of the interim order passed by the trial Court on 18-8-1992........"

(v) In Ashwani Kumar vs. Lachi Ram, AIR 2003 HP 28, it has been

held as under:-

"17. .....If after the grant of temporary injunction by the Court, a party brings about any change in the subject-matter of the suit in disregard of the orders of the Courts, it is within the power of the Court to restore the things to the position where they stood immediately before the grant of the ad-interim injunction."

(vi) In Keshrimal Jivji Shah vs. Bank of Maharashtra, (2004) 122

Comp Cas 831 (Bom), it has been held as under:-

"26. ......It is time that we recognize the principle that transfer of immovable property in violation of an order of injunction or prohibition issued by Court of law, confers no right, title or interest in the transferee, as it is no transfer at all. The transferee

cannot be allowed to reap advantage or benefit from such transfer merely because he is not party to the proceedings in which order of injunction or other prohibitory direction or restraint came to be issued. It is enough that the transferor is a party and the order was in force. These two conditions being satisfied, the transfer must not be upheld. If this course is not adopted then the tendency to flout orders of Courts which is increasing day by day can never be curbed......"

(vii) In Punjab National Bank vs. Delite Properties Pvt. Ltd., AIR

2004 Calcutta 114, it has been held as under:-

"17. It is settled position of the law that if any person or persons in breach of the order of Court comes in possession in a suit property they do not acquire any right or authority and they are to be dealt with amongst other by passing the order of eviction and further with an appropriate order of punishment...."

(viii) In Praveen Garg vs. Oriental Bank of Commerce, 128 (2006)

DLT 811, it has been held as under:-

"6. The question that arises for my consideration is whether the Recovery Officer in view of a stay order by the competent court could have proceeded with such an auction and whether such an auction which then creates a title, can be set aside?.......From the law enunciated by the Supreme Court it is clear that sale of property is non est. The Recovery Officer had no right to subject the property to sale. Consequently, any auction pursuant thereto would be of no consequence."

(ix) In Madhur Poddar vs. Ashok Poddar, (2006) 2 Calcutta Law

Times 133 (HC), it has been held as under:-

"7. ....I am of the further view that if any property is sold and/or alienated in reach of the order of injunction transferee cannot get any title. Under the law such as action would be invalid and non-est....

xxx xxx xxx

49. The law is thus settled. There is nothing to the contrary. If an argument to the contrary were to be accepted Court orders would loose their meaning and administration of justice will be affected. Here the breach was carried out with impunity and with misplaced confidence that they will get away with the wrong. The order has to be enforced. The property has to be brought back to the company. The respondents cannot be allowed to either escape the punishment or the consequences of their action."

Consequently, as the Sale Deed dated 14th July, 1998 has been

executed only after appointment of Provisional Liquidator and injunction

order dated 05th June, 1998, this Court finds no infirmity in the decision

rendered by the One Man Committee. The sale is void under Section

537(1)(b) of the Act.

This Court is further of the opinion that even though the applicant

is entitled in law to invoke the jurisdiction of the Court under Section

536(2) of the Act, yet keeping in view the totality of the facts of the case,

this Court is not inclined to grant any relief under said Section.

Accordingly, the application is dismissed. It is held that the

applicant-claimant is not entitled to allotment of Plot No. F-201,

measuring 234 sq. yds. in Survey Nos. 94 to 97 and 189, Kondapur