National Investor Forum Regd. vs Golden Forests India Ltd.
2014 Latest Caselaw 4834 Del

* IN THE HIGH COURT OF DELHI AT NEW DELHI
                                          Decided on: 25.09.2014

+      W.P.(C) 1399/2010

       NATIONAL INVESTOR FORUM REGD. ..... Petitioner

                       versus

       GOLDEN FORESTS INDIA LTD.              ..... Respondent

+ W.P.(C) 1400/2010

NATIONAL INVESTORS FORUM ..... Petitioner

versus

GOLDEN FORESTS INDIA LTD. ..... Respondent

Through: Sh. Harpawan Kumar Arora, Advocate, for Committee-GFIL.

Sh. Pawan Mutreja with Ms. Prachi. V.

Sharma, Advocates, for Resp. No.2 in C.M.

No.3988/2013 in Item No.9.

Sh. Rajeev Sharma and Sh. Sahil Bhalaik,

and 10.

CORAM:

HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE VIPIN SANGHI

MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT)

% C.M. NO.3988/2013 in W.P.(C) 1399/2010

W.P.(C) 1399/2010 Page 1

1. By this application, the Committee for GFIL seeks confirmation of its two orders dated 09.01.2013 and 12.03.2013. These, in turn, were based on proceedings initiated pursuant to the Show Cause Notices issued to the first two respondents on various dates - 11.07.2012, 18.07.2012 and 30.01.2013. All these are in respect of a title to the extent of 42 kanal 19 marlas of land at Village Billa, Tehsil and District Panchkula. These were the subject matter of two sale deeds in favour of the first respondent dated 15.02.2000 (for 32 kanals for a total consideration of `4.8 lakhs) and 14.03.2000 (to the extent of 10 kanals 19 marlas for a total consideration of `1,80,675/-) In turn, this total extent of land was sold by registered sale deed dated 27.02.2007 to the second respondent company. The Committee's orders indicate that it became aware of the transfers in violation of the Bombay High Court's injunction order dated 23.11.1998. That order was confirmed by the Supreme Court on 05.09.2006 and has been adopted as the cut-off date for determining the transactions - distinguishing the valid from invalid transactions - which would not be binding on the erstwhile GFIL and its investors. The reasoning adopted by the Committee was that the two sale deeds in favour of the first respondent Sh. Krishan Kumar Palta - (made pursuant to Resolutions of 20.08.1999 and 11.03.2000 in favour of the Company Patwari - Kesar Singh Thakur) - to the whole extent of 42 kanal 19 marlas, and the subsequent sale from the first respondent to second respondent were void due to breach of the operating injunction orders.

W.P.(C) 1399/2010 Page 2

2. Both the respondents have entered appearance and resisted the proceedings. It is argued - primarily on behalf of the second respondent, that the sale deed dated 27.02.2007 ought not to be interfered with in the circumstances of the case. Learned counsel submits, firstly, that there was nothing on the record indicative of the sale in favour of the first respondent being hit by prohibition or impediment. In support of this, he underlines the fact that neither the Jamabandi, nor any advertisement indicate that the sale which took place in 2000 in favour of the first purchaser, i.e. the first respondent, was ever declared to be impermissible. Emphasising this aspect, learned counsel submitted that the subsequent purchase in 2007 by the second respondent, therefore, was clearly a bona fide transaction and that the dint of illegality could not attach itself to it. It was argued that the material on record suggested that the Bombay High Court was made aware about the possibility of a sale of the erstwhile GFIL properties. In this regard, learned counsel relied upon the orders of the Bombay High Court dated 30.09.1999 and 16.02.2000. It was submitted that the reply to the RTI queries made to the Securities and Exchange Board of India (SEBI) clearly indicate that certain sums, notably, `25 lakhs were received pursuant to such sales and, in fact, deposited with the Bombay High Court. Learned counsel also pointed out that the Bombay High Court was, in fact, aware of the properties which are subject matter of present proceedings and that in these circumstances, the Committee was under no obligation to adopt the approach that it has uniformly adopted all this while, and declare the transactions in question as void or invalid. Learned counsel relied

W.P.(C) 1399/2010 Page 3 upon the decision of the Supreme Court reported as Hardev Singh v. Gurmail Singh 2007 (2) SCC 404, in support of the submission that neither Section 41 nor Section 52 of the Transfer of Property Act can be attracted in the circumstances of the case. It was highlighted that there was no material for the second respondent purchaser at the stage of entering into the transaction to reasonably infer that the sales were prohibited, having regard to the totality of facts.

3. Learned counsel for the applicant Committee submitted that the order cancelling and declaring the transactions - through the sale deeds in question dated 15.02.2000, 14.03.2000 and subsequently 27.02.2007 invalid is justified. It was argued in this context that in almost identical circumstances, similar sale transactions have been set aside; learned counsel made specific reference to the orders dated 01.11.2012 in C.M. No.18353/2011; 01.04.2013 in C.M. No.595/2013; dated 22.04.2013 in C.M. No.6975/2012 and C.M. No.11128/2012 and other cases.

4. At the outset, before discussing the merits of the respondents' contentions, it would be profitable to set out the following extracts of the order of the Bombay High Court dated 23.11.1998 in CWP 344/1998 (SEBI v. Golden Forests India Ltd.):

"The respondent-company and its subsidiaries as well as the Directors are directed not to dispose of any property of the respondent-company or its subsidiaries or its Directors till further orders."

W.P.(C) 1399/2010 Page 4

5. Apparently, a similar order was made in CWP 3352/1998 on 07.10.1998. The records indicate that during the subsistence of these orders, the first two sale deeds which are subject matter of present proceedings were executed - by one Patwari Kesari Singh Thakur said to be in pursuance of two Resolutions by the Company, represented by his attorney in that regard. The Supreme Court, by its order dated 05.09.2006 in the transfer petition pending before it inter alia noticed the order of the Bombay High Court and indicated as follows:

"39. Insofar as the period prior to the appointment of provisional liquidator in the winding up petition in the Punjab and Haryana High Court and Delhi High Court is concerned, the Bombay High Court in its order dated 23rd November, 1998 had restrained the Company, its subsidiary as well as directors not to dispose of the properties of the respondent Company or its subsidiaries or its directors till further orders. It would be to the Committee to make appropriate recommendations to this Court regarding the status of sales made after the restraint order passed by the Bombay High Court on 23rd November, 1998. Any application putting a claim for settlement of properties after the restraint order passed by the Bombay High Court should be made to the Committee which shall be at liberty to make appropriate recommendations to this Court for its consideration."

6. It is thus clear that normatively the Supreme Court indicated that "23.11.1998" ought to be treated as the cut-off date for determining the validity, or otherwise, of a transaction. No doubt, the Committee - the applicant in this case - is left with the discretion of making appropriate recommendations to this Court with regard to the transactions. However, that does not alter the cut-off date which has

W.P.(C) 1399/2010 Page 5 been adopted in all these proceedings whenever the Committee has been discharging its task of collecting the properties and bringing them to sale, and to pronounce upon the validity of the previous transactions.

7. This Court is of the opinion that the respondent's submission that the GFIL and, consequently, the Committee are bound by the sale transactions, cannot succeed. Firstly, the facts of this case, in the opinion of the Court, do not present any singularly different picture than those which had been decided in earlier applications. Consistency, therefore, demands that this Court adopts the same approach. Further and more pertinently, with regard to the facts of this case that neither the Supreme Court-appointed Committee nor the erstwhile GFIL ever publicised the injunction orders, cannot in any manner undermine the cut-off date put in place by the Supreme Court in its decision taken on 05.09.2006 by its order. That cut-off date is uniform, i.e. 23.01.1998. As the winding up proceedings were initiated later in 2001, fraudulent transactions relatable to Section 536 of the Companies Act would date from the point of time of presentation of those proceedings on a textual interpretation of that provision. Yet, in the facts of this case what emerges is that 23.01.1998 was directed by the Supreme Court to be the cut-off date for taking into consideration the validity of the sale transactions.

8. So far as the submissions of the respondents with respect to the Bombay High Court noticing and endeavouring to sell certain properties are concerned, whether such an effort was undertaken and

W.P.(C) 1399/2010 Page 6 whether that, in fact, led to its fruition and consequent court-blessed sale, or otherwise, is not something that is discernable from the record. All that the two orders, notably the order of 1999 demonstrate is that the Bombay High Court was conscious of the fact that several properties were owned by GFIL. Apparently some efforts to sell the properties were made but no buyer was forthcoming. The Court also appointed a private receiver in the form of retired Chief Justice of the Karnataka High Court - Justice M.L.Pendse (Retd). In these circumstances, there is no merit in the submission of the learned counsel that there was an implied approval of the sales undertaken in the present case. On the contrary, there is nothing on the record indicating confirmation of two sales which led to title ostensibly passing in favour of the first respondent in 2000.

9. As far as the decision in Hardev Singh (supra) is concerned, this Court notices that the Court was called upon almost entirely to decide upon Section 41 i.e. the representation ostensibly by the authorised persons to sell the properties and the doctrine underlying it

- i.e. "feeding the estoppel". Clearly that doctrine is not applicable in the circumstances of the case. On the contrary, the present is a clear instance where the Court directed embargo in the form of an injunction, which was consciously flouted by the erstwhile GFIL. The tenuousness and invalidity of such transactions has been spelled out in pronouncements, notably in the decision reported as Vidur Impex and Traders (P) Ltd. v. Tosh Apartments (P) Ltd. 2012 (8) SCC 384.

W.P.(C) 1399/2010 Page 7

10. In view of the foregoing discussion, this Court is of the opinion that there is no merit in the objections articulated by the respondents. The orders of the Committee dated 09.01.2013 and 12.03.2013 are, consequently, confirmed. The sale deeds which are the subject matter of said orders are set aside. The second respondent shall hand over peaceful and vacant possession of the said lands within eight weeks from today, failing which it is open to the petitioner Committee to take appropriate steps and, if necessary, seek assistance of the local administration and police. The right of the second respondent to claim any relief against the first respondent in such manner as is known to law is kept open in view of the lack of title of the first respondent. C.M. No.3988/2013 accordingly stands disposed of.

W.P.(C) 1400/2010

List on 27.10.2014 along with W.P.(C) 1399/2010.

S. RAVINDRA BHAT (JUDGE)

VIPIN SANGHI (JUDGE) SEPTEMBER 25, 2014

W.P.(C) 1399/2010 Page 8