Delhi High Court
Re-M/S Jvg Finance Ltd. vs .... on 7 August, 2020
$~J-
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 07.08.2020
+ Co. Pet. 265/1998
RESERVE BANK OF INDIA ..... Petitioner
Through Ms. Swati Setia, Adv.
versus
JVG FINANCE LTD. ..... Respondent
Through Mr. Kunal Sharma, Adv. for the OL
Mr. Dheeraj Gupta, Ms. Sanam Siddiqui and
Ms.Diksha Arora, Advs. with Ms. Aneeta Sharma,
AR of the JVG Group
Mr. Giriraj Subramanium and Mr.Simarpal Singh
Sawhney, Advs. for the applicant.
CORAM:
HON'BLE MR. JUSTICE JAYANT NATH
JAYANT NATH, J.
CA No. 547/2011
1. This application is filed by the applicant-M/s. Tirupati Cylinders Ltd.
seeking the following reliefs:-
"a) issue appropriate direction or order to the effect to set aside
or not to accept the recommendation made by the learned Mr.
G.P. Thareja - the Presiding Officer of the One Man Committee
constituted by this Hon‟ble Court in its XIIIth Report dated
05.02.2007 in regard with the claim made by the present
applicant in CA No. 1171 of 2003 in Company Petition No. 265
of 1998 in the interest of justice;
b) grant permission to the applicant company to complete the
process of registration/execution of the Sale Deeds of the land
mentioned in the Annexure A-2 in terms & conditions as
mentioned in the said agreements annexed with the Annexure
A-3 (colly) by modifying/clarifying the said order dated
03.02.2002 passed by this Hon‟ble Court in the present case
and also issue appropriate further direction to the appropriate
authority not to put any restriction in the process of
registration/execution of sale deeds of the properties as
mentioned in Annexure A-2; or
c) refer this case to the newly constituted J.P. Aggarwal
Committee to examine the claim of the applicant company by
providing all necessary documents, particularly Exhibit No. 1 to
Exhibit No. 17 [as referred by the then Thareja Committee] to
the applicant company; "
2. The case of the applicant-M/s. Tirupati Cylinders Ltd. is that the
applicant purchased certain lands in question from the companies of the JVG
Group through Sh. V.K. Sharma who was the authorised signatory. The
applicant claims to have purchased these lands from JVG Hotels Ltd., JVG
Housing Finance Ltd., JVG Foods Ltd., JVG Farm Fresh Ltd. and JVG
Steels India Ltd. These lands are located in District and Tehsil Gurgaon,
Haryana and located at Village Sindhrawali or Village Bhorakhurd. Full
details of the description of the lands and the consideration paid are spelt out
in Annexure A-2 of the application. All the seller companies belong to the
JVG Group of Companies which comprise of large number of such
companies. It is claimed that a number of these companies have gone into
liquidation but at the time of purchase of the land, the companies noted
above were not under liquidation.
All these purchases were made during the period from May 2002 to
July 2002. The entire consideration for the alleged purchase of the lands has
been paid in cash allegedly to Mr. V.K. Sharma, the ex.-director of the JVG
Group of Companies. Power of attorney and agreement to sell were executed
and duly registered with the appropriate authorities during the aforesaid
period itself. Registered irrevocable general power of attorneys were
executed in favour of the Director of the applicant Company, namely, Sh.
Dinesh Goyal. It was also agreed in the registered agreement to sell that the
applicant Company can register sale deeds in its own name or in favour of
any of its nominee or any other person or firm, etc. It is claimed that the
physical possession of the property is also with the applicant Company.
3. On 03.09.2002, this court directed that prior to affecting any sale,
alienation, transfer or creation of any third party interest in any assets of the
JVG Group of Companies, permission of this court should be obtained.
4. It is the contention of the applicant that the properties in question
were purchased from May 2002 to July 2002. All the documents were duly
registered with the appropriate authorities. The entire sale consideration had
been duly paid and the applicant had taken possession of the land concerned.
Hence, it is stated that there is no violation of the interim order dated
03.09.2002 passed by this court. The said order, it is pleaded, does not apply
to further sale, alienation and transfer by the applicant. It is further pleaded
that in terms of the agreement to sell, it was compulsory for the purchaser
company, namely, the applicant to execute the sale deeds with regard to the
properties purchased by 20.12.2003 or 30.12.2003 failing which the
agreement to sell was to stand cancelled and the advance money was to get
forfeited.
5. Hence, the applicant filed CA No. 1171/2003 for grant of permission
to the applicant company to complete the process of registration/execution
of sale deeds. On 22.07.2004, this court while dealing with this application
and other applications appointed a One Man committee of Sh. G.P. Thareja,
Retd. Additional District Judge, Delhi for verifying the claims of various
applicants. The Thareja Committee thereafter submitted its report being the
VIIIth Report dated 16.01.2006. In the report, it noted the submission of the
representative of Tirupati Cylinders Ltd. that it had moved this court for
withdrawal of the petition moved by them and further stated that he has
nothing further to say in the matter. The Committee further recorded that the
claim of Tirupati Cylinders Ltd. as per evidence so far collected does not
appear to be sound. However as stated, it noted that the said Tirupati
Cylinders Ltd., the applicant sought to withdraw.
6. On 10.03.2006, this court disposed of CA No. 1171/2003 with the
direction again to the applicant Company to appear and put its claim before
the G.P. Thareja Committee, the One Man Committee constituted by this
court.
7. It is pleaded that before the Thareja Committee, the applicant filed all
the relevant documents to prove its title. The applicant also filed two
certificates i.e. a certificate dated 01.05.2006 issued by State Bank of
Bikaner & Jaipur, Muzaffar Nagar (U.P.) stating that the applicant Company
had withdrawn an amount of Rs. 9 lakhs on 17.05.2002 and an amount of
Rs. 7.50 lakhs on 20.05.2002. Another certificate was filed of PNB, Preet
Vihar dated 04.05.2006 wherein it was stated that the applicant Company
had withdrawn a total of Rs. 36 lakhs by various cheques during the period
from 17.05.2002 to 23.05.2002. Hence, proof of cash in hand to pay the
stated consideration of about Rs.45 lakhs is said to have been shown.
8. It is stated that the Thareja Committee never gave/served a copy of its
order on the applicant. The applicant thereafter filed CA Nos. 72/2011 and
73/2011 wherein after hearing the parties, this court directed the counsel for
the Official Liquidator to supply a copy of the report/recommendations of
the Thareja Committee dated 05.02.2007. That is how, it is claimed that the
applicant got a copy of the report of the Thareja Committee with regard to
the claim of the applicant Company. This report was received allegedly on
07.02.2011 by the applicant.
9. A perusal of the said report of the Thareja Committee dated
07.02.2007 shows that the claim of the applicant Company - Tirupati
Cylinders Ltd. has been rejected. Hence, the present application challenging
the findings of the Thareja Committee.
10. The Official Liquidator (OL) has filed its reply. The OL in its reply
has pointed out that the applicant is not entitled to any permission as sought
for. The property in Gurgaon was purchased from the funds of JVG Finance
Ltd. (in liquidation) and the properties of the Company in liquidation have to
be taken control of by the OL in the interest of bona fide
depositors/creditors. It is also pointed out that SFIO has also conducted an
enquiry which also dealt with the Gurgaon land of the Company-JVG
Finance Ltd. In the SFIO report dated 11.02.2010, it is established that Sh.
V.K. Sharma, Ex.-CMD of the JVG Group of Companies (in liquidation) in
connivance with relatives and associates had purchased land worth Rs. 22.80
crores in the name of various JVG Group of Companies using the funds of
JVG Finance Ltd. The SFIO report further states that Sh. V.K. Sharma
further sold the land of these companies to parties/companies @ Rs. 2 lakh
per acre and made joint GPA and agreement to sell in favour of Sh. Dinesh
Goyal and his company - Tirupati Cylinders Ltd. SFIO found the resolution
authorising Sh. V.K. Sharma to make agreement to sell and GPA on behalf
of five JVG Group of Companies as fabricated. It is claimed in the reply that
SFIO has made it clear that Sh. V.K. Sharma along with other directors of
JVG Hotels Industries Ltd., JVG Steels India Ltd., JVG Publications Ltd and
JVG Industries Ltd. had made forged documents to facilitate the entire fraud
by siphoning off funds of JVG Finance Ltd. It is also stated that this court
has in its order dated 27.11.2010 noted the submission of Sh. V.K. Sharma
that he does not have any objection to the sale of the properties in question
inasmuch as they belong to JVG Finance Ltd. though they may have been
purchased in the names of different companies like JVG Housing Finance
Ltd., JVG Farm Fresh Ltd., JVG Hotels Ltd. JVG Steels India Ltd., JVG
Foods Ltd, etc.
It is further stated that the copies of the resolution of JVG Housing
Finance Ltd, JVG Farm Fresh Ltd, JVG Steels India Ltd., JVG Foods Ltd.
and JVG Hotels Ltd. adduced in the application reflect the registered office
and head office on the date of the resolution i.e. May 2002 at 1, Ashoka
Park, Main, New Rohtak Road, New Delhi and B-22, Ansal Chambers-I,
Bhikaji Cama Place, New Delhi. It is pleaded that the OL in the month of
June 1998 had taken possession of the property at New Rohtak Road and
Ansal Chambers much before passing of the said resolution. The resolutions
are hence forged.
11. A reply has also been filed by Sh. V.K. Sharma, Ex-Chairman of JVG
Group of Companies. In the said reply, it is stated that all the properties of
the JVG Group of Companies have been purchased from the finances/funds
of JVG Finance Ltd. (in liquidation). It is denied that the applicant Company
had paid any consideration to Sh. V.K. Sharma or that any land had been
sold to the applicant - Tirupati Cylinders Ltd. It is admitted that Sh. V.K.
Sharma had issued power of attorneys and agreement to sell in favour of Sh.
Dinesh Goyal, the Director of Tirupati Cylinders Ltd. to safeguard the
properties of JVG Companies at Gurgaon as Sh. Dinesh Goyal was a very
close friend/neighbour of Sh. V.K. Sharma at Kurushetra. Sh. Dinesh Goyal
told Sh. V.K. Sharma that unless, he had some rights/documents in his
favour he could not protect the valuable land of JVG from illegal
encroachers/trespassers. The power of attorney and agreement to sell were
given to Sh. Dinesh Goyal as the land in Gurgaon was not properly
demarcated and also the possession of the said land was not taken over by
the Official Liquidator till 2002. In order to protect the land from the
villagers and encroachers who were cultivating the said land, the said step
was taken. It is further pleaded that Sh. V.K. Sharma was facing a lot of
litigation and he could not take steps to defend the land and hence, the need
to issue the necessary agreement to sell and power of attorney. It is further
stated that the land was purchased at a much higher rate than the
consideration alleged to have been paid by the applicant Company. It is
further stated that till date, the land in Gurgaon has not been properly
demarcated. Further, it is stated that the applicant despite several
opportunities had failed to produce original statement of accounts/cash
books/vouchers/etc. before the Thareja Committee. The applicant only
produced two certificates from the bankers which were not sufficient to
convince the Thareja Committee.
12. One Mr. Anil Aery on behalf of the applicant has also filed an
additional affidavit dated 13.02.2012 and stated that in some earlier
proceedings before this court in CCP 20/2002, the Ex.-Chairman-Sh. V.K.
Sharma had filed a reply/affidavit dated December 2002 where he had
accepted all the documents which are being relied upon by the applicant and
validated the purchase of land at Gurgaon by the applicant Company.
13. A perusal of CA No.547/2011 shows that various reasons are given by
the applicant as to why the findings of the Thareja Committee should be set
aside. The following salient submissions have been raised in the
application:-
(i) The Thareja Committee has made conclusions about the sale
consideration paid by the applicant being below market price on the basis of
certain exhibits i.e. Ex. X-1 to Ex. X-27. It is claimed that these were never
shown or supplied to the applicant Company. Hence, the report has been
passed contrary to the principles of natural justice.
(ii) It is claimed that the Thareja Committee went on the basis of evidence
of one Sh. Sushil Kumar Gupta who allegedly helped the JVG Group of
Companies to buy the land in question. The applicant was never informed
about the investigation or examination of the aforesaid Sh. Sushil Kumar
Gupta with respect to the applicant‟s claim. No opportunity was also granted
to the applicant Company to cross-examine Sh. Sushil Kumar Gupta. Hence,
it is claimed that the procedure adopted was one sided.
(iii) At no point, did the Thareja Committee summon Sh. V.K. Sharma,
Ex.-Managing Director of JVG Group of Companies. The Committee never
asked Sh. V.K. Sharma as to whether he had received money/consideration
from the applicant company.
(iv) It is further stated that in spite of producing two certificates dated
01.05.2006 and 04.05.2006 issued by the concerned branch managers of the
banks with regard to withdrawal of money paid by the applicant to Sh. V.K.
Sharma, the said branch managers were never summoned for recording of
their evidence. Hence, it is claimed that the entire enquiry report is illegal
and void.
(v) It is further stated that the transaction by the applicant was a bona fide
transaction. On the date of the transaction, some other companies of the JVG
Group were under liquidation but not the five companies from whom the
applicant had purchased the property.
14. I have heard learned counsel for the applicant, learned counsel for the
OL and learned counsel for the ex-directors.
15. Learned counsel for the applicant has reiterated the contentions as
raised in the above grounds. It is reiterated that Ex. X-1 to Ex. X -27 were
not shown to the applicant. It is also stated that no records were summoned
from the office of the Sub-Registrar on the issue of actual valuation of the
property in question. It is reiterated that Sh. Sushil Kumar Gupta was never
cross-examined. It is reiterated that the agreements to sell were duly signed
and registered by Sh. V.K. Sharma. Reliance is also placed on the SFIO
report where the statement of Sh. V.K. Sharma is also noted.
16. I may note that the applicant has also filed written submissions. In the
written submissions the following pleas have been raised:
(i) The Thareja Committee failed to comply with the principles of natural
justice inasmuch as the applicant was not given copies of documents Ex. X-1
to Ex. X-27 and was not able to rebut the said documents. Based on these
documents, the Committee came to a conclusion that the transaction in
question which is the subject matter of the present application was grossly
undervalued.
(ii) It is pleaded that had the applicant been confronted with these
documents, the applicant would have informed the Committee that the
records supplied by JVG detailing the price paid by it for lands in Gurgaon
area cannot be relied upon.
(iii) It is further pleaded that if the above noted facts were brought to the
notice of the applicant, the applicant would have summoned the concerned
Sub-Registrar or Tehsildar who would have deposed before the Committee
as to the actual and correct value of the properties. Such evidence would
have helped the Committee to come to a correct conclusion regarding the
market price.
(iv) It is further submitted that the applicant had submitted 6 examples of
registered sale deeds for the same village which show that the prevailing
rates in 1996 were many times lower than what was alleged by Sh. V.K.
Sharma.
(v) It is further pleaded that the Committee never directed Sh. V.K.
Sharma to appear and testify. It is pleaded that had Sh. V.K. Sharma entered
the witness box, he could have been examined by the Committee and
confronted with the transaction.
(vi) It is further pleaded that the Committee examined Sh. Sushil Kumar
Gupta and came to a conclusion regarding the undervaluation of the
property. No opportunity was given to the applicant to cross-examine Sh.
Sushil Kumar Gupta.
(vii) It is further pleaded that the applicant had submitted a copy of its cash
book at the relevant time which demonstrates that cash money was paid by
the applicant to the JVG Group as consideration for executing agreement to
sell and GPA. It is pleaded that these facts have been ignored by the
Committee.
(viii) It is further pleaded that the Committee never communicated to the
applicant that the certificates from the bankers which have been supplied
showing withdrawal of money were unworthy of credence. Had such a view
been placed before the applicant, the applicant would have taken remedial
measures. It is pleaded that the stand of the Committee was misplaced as the
statement of the branch managers was in conformity with the Bankers Books
Evidence Act, 1891.
(ix) It is further pleaded that the conclusion of the Committee that the
receipts, all of whom have the number „001‟, are fictitious was never put to
the applicant. Had any such issue been posed to the applicant, the applicant
would have summoned the signatory of the receipts for his testimony.
(x) It is stressed that in various proceedings including in an application
dated 22.02.2012, Sh. V.K. Sharma has acknowledged the execution of the
agreement to sell as well as GPA.
17. Learned counsel for the OL and the ex.-directors have also reiterated
their submissions as noted above.
18. Written submissions have also been received from Sh. Mayur Shah,
Advocate for the investors. It is pointed out that it was the applicant who in
2006 had refused to continue with further investigation and withdrawn its
application. Now, after lapse of 5 years, it cannot claim violation of
principles of natural justice in 2011 for a report that was submitted in 2007.
19. I may first look at the VIIIth Report of the Thareja Committee dated
16.01.2006. The conclusions of the Report read as follows:-
"From the above the following position emerges.
(i) That the land which has been purchased in Gurgaon in the
name of various companies as noted above has been purchased
from the funds of JVG Finance Ltd. (under liquidation)
(ii) The claim of M/s. Tirupati Cylinders as per evidence so far
collected does not appear to be sound. As such they as stated
before the Committee wants to withdraw.
(iii) It is recommended that the official liquidator should take
control of the lands at Gurgaon immediately including the land
which the applicant had claimed to have been purchased by it
through Sh. V.K. Sharma, Ex. Managing Director of JVG
Group of Companies.".
20. Hence, as per the VIIIth Thareja Committee Report, the land which
was purchased in the name of various companies has been purchased from
the funds of JVG Finance Ltd. The claim of Tirupati Cylinders Ltd.-the
applicant was rejected.
21. As noted above, the applicant was again referred back to the Thareja
Committee vide order dated 10.03.2006 of this court whereafter the
Committee passed the XIIIth Report dated 07.02.2007. I may now look at the
XIIIth Report of the Thareja Committee and its conclusions. Certain
observations of the Thareja Committee are quite revealing. The observations
are as follows:-
(i) The Committee notes that Sh. Dinesh Goyal‟s statement was
recorded. He could not tell about the accounts and in fact, he deposed that
the position of the account will be explained by the accountant. He did not
bring the original documents which were executed in lieu of the payments
made. He also could not tell what amount was paid in respect of each
particular transaction.
In his statement made on 28.10.2005, Mr. Dinesh Goyal admits that
the land is not divided and was purchased in a combined Khewat. The
properties were also in the joint names of the alleged sellers. He also admits
that the land is not in the names of the applicant Company. He also admits
that he has not brought the original documents which were got executed
from Sh. V.K. Sharma on behalf of different Companies or the original
Khewat.
(ii) The Report looks at the agreement with JVG Hotel Ltd. It is pointed
out that the said property was purchased in the name of JVG Hotels. Ltd. for
a consideration of Rs.29.55 lakhs. The consideration said to have been paid
by the claimant for the property to JVG Hotel Ltd. is Rs. 8,10,000/-. Hence,
the report notes that the land purchased in 1996 for Rs. 29.55 lakhs was
agreed to be sold in 2002 for a consideration of Rs.8,10,000/-. The land is
situated adjacent to National Highway 24 going towards Jaipur from
Gurgaon and the land prices would have shot up. The report concludes that
clearly, the transaction is not bona fide
(iii) The Committee also records that the receipt of alleged consideration
paid to JVG Hotels Ltd. which was produced on record bears number „001‟.
The applicant also produced receipts of other companies which also bear the
number „001‟. The report concludes that there cannot be receipts bearing the
same number i.e. „001‟ in the case of purchase of land from JVG Hotels
Ltd., JVG Farm Fresh Ltd., JVG Housing Finance Ltd., JVG Foods Ltd.
And JVG Steels India Ltd.
22. The Committee concluded as follows:-
"I have found as herein before noted especially in the
matter of land Transactions of JVG Hotels that the land which
has been purchased for a high value in the year 1996 cannot be
sold at a meagre value in the year 2002 particularly when the
land is situated adjacent to NH-24 on the Road, going from
Gurgaon to Jaipur. In fact land during the period escalated 10
times. The observation made show that the land has been
agreed to sold at less than 1/4th and 1/5th of value at which it
was purchased. I have already held that the transaction are
against the guidelines of the RBI and in fact fraudulent one.
Even the original documents of title deed have not been
procured while parting with the meagre amount. Even the
meagre amount was also not paid by cheque as it is required by
the Income Tax Laws. Yet, I consider the submissions which
have been made by Sh. A.K. Ganguly, Advocate, in the matter.
The submission of Sh. A.K. Ganguly that the companies
in whose name the land existed were not under liquidation and
the land have been purchased bonafide and that the claimant
had come to know by letter dated 19.11.1998 written by the
Official Liquidator that the land in question was not included in
the letter. On the face of the observation made by me herein
above the submission of Sh. Ganguly has no merit. A purchaser
of the land is not only to inspect the revenue record to see if the
land subsist in the name of the Company from whom the
claimants is purchasing but also for what value the land was
acquired by such company. If the land was agreed to be sold at
a meagre consideration, what was the reason for the same. It
cannot be denied that the land has been agreed to be purchased
at the meagre value. In absence of any reason in the agreement
to sell, I find that submissions of Sh. Ganguly cannot be
accepted.
It is submitted by Sh. Ganguly that the claimant had
agreed to purchase the land during May 2002 to July 2002. The
Claimant had to obtain the permission on account of the order
dated 03.09.2002. There was no directions that the land of the
Companies which are not in liquidation cannot be sold. Further,
Sh. Ganguly submitted that the claimant should not be
penalized and victimized for the wrong misconduct committed
by Sh. V.K. Sharma, Ex-Chairman of the Companies under
liquidation. When confronted with the order of the court dated
3.9.2002 that the court has noted the complaints about the sale
of the land and made observation regarding piercing the
corporate veil. Sh. Ganguly submitted that such an inquiry is
beyond the jurisdiction of the Committee. He placed reliance
upon Indian Law Reporter (1979) 2 Kerala 102, Solomon vs.
Salomon and (1897) A.C. 22 and insisted that companies which
entered into transaction are not the agent of the companies
under liquidation. They are separate entitles. Their act cannot
be questioned.
The submission of Sh. Ganguly on the face of the
findings herein above that for the purchase of the land the
money of M/s. JVG Finance under liquidation was used cannot
be accepted. Furthermore this committee vide its order dated
16.2.2005 as already reproduced earlier also asked the claimant
to produce all the accounts books of the claimant pertaining to
the year 2002. The Accounts were not produced. The claimant
were also asked to produce evidence that the claimant had
actually parted with the money in favour of the Companies
selling the land and they were the bonafide purchaser. In spite
of repeated asking no such evidence has been produced. Instead
only two certificates one from State Bank of Bikaner and
Jaipur dated 01.05.2006 and another from Punjab National
Bank dated 04.05.2006 has been produced. The certificate only
depict that certain amount of money was withdrawn from the
bank account of the claimant. Such certificate is no certificate
in the eyes of law. It cannot be given any importance. Law
gives importance to the statement of account of the bank
provided such statement of account is issued under the Bankers
Books Evidence Act. Furthermore how such withdrawals where
utilized can be told by the accounts books of the claimant which
have not been produced. Even the bank managers have not been
produced in the witness box to depose about the genuineness of
certificates brought by the claimant. Under the circumstances
no value can be attached to certificate produced by the
claimant. No importance can be given to the deposition of Sh.
Dinesh who has been examined on behalf of claimant. The
material evidence both oral as well as documentary has not
been produced by the claimant since the claimant knew that the
transaction claimed by the claimant are not genuine and
bonafide as such the benefits of the judgments cited by Sh.
Ganguly is not available to the claimant.
In view of the reasons stated above I find that there is no
merit in the prayer of the claimant. The claimant is not entitled
to the permission sought for. The property situated at Gurgaon
noted herein above and various other properties which are also
there having been purchased from the funds of M/s JVG
Finance ltd. as disclosed in exhibited in EX-1 - EX-17 are the
properties of companies under liquidation to be taken into
control by the official liquidator in the interest of the bonafide
depositor/creditors of the Companies under liquidation.
Recommendation for the disposal of the application is
made to the Hon‟ble Court, that the prayer of the claimant has
no merit and cannot be granted. Report with respect to
application No. 1171/2003 is submitted to the Hon‟ble Court
for directions/orders accordingly. On the application and also
for directions to the Official Liquidator."
23. The Thareja Committee hence concludes that an amount of Rs. 22.80
crores from which the lands in Tehsil Gurgaon, Nuh, Tavru and Tizara were
purchased was provided from the accounts of JVG Finance Ltd. and was
transferred from the account of JVG Finance Ltd. to the account of Sh.
Sushil Kumar Gupta. A total of Rs. 22.80 crores was transferred. Properties
were purchased in the name of various companies of JVG Group. The report
comes to the conclusion that the land was purchased by Sh. Sushil Kumar
Gupta in the name of various JVG Group of Companies at a value less than
the value shown by him in documents Ex. X-1 to Ex. X-17 (The applicant
however states that there are 27 exhibits i.e. Ex. X-1 to Ex. E-27). It is
further stated in the report that Mr. Anil Karanwal, Advocate was called
upon to produce evidence that they had actually parted with money in favour
of different companies and they are the bona fide purchasers of the land. No
satisfactory evidence was adduced. The case of the applicant was rejected.
24. Another important report which has gone in detail of the stated
transaction is the SFIO (Serious Fraud Investigation Office) Report. I may
also look at some of the relevant portions of the SFIO report which read as
follows:-
"4.1.5 One Shri Dinesh Goyal s/o Shri Gian Chand Goel, r/o D-
14, Preet Vihar, Delhi appeared before the Inspectors on
21.07.2008 and submitted relevant details/documents
(Annexure-22) to Investigation. On scrutiny of these
details/documents it is noticed that Shri Vijay Kumar Sharma,
CMD of JVG Group has further sold the land of these
companies to parties/companies @ Rs.2 lac per Acre. Shri
Vijay Kumar Sharma, as Managing Director of the said
Companies, has made General Power of Attorney & Agreement
to sell in favour of Shri Dinesh Goyal and his company, M/s.
Tirupati Cylinders Pvt. Ltd. The details of said land submitted
by Shri Dinesh Goyal are as under:-
S.No Name of Company Area of Land Date of Amount Name of
Kanal Marla Agreement received Villages of
as Distt.
advance Gurgaon.
(Rs.)
1. JVG Foods Ltd. 32 15 23.5.2002 8,18,750 Sidhrawali
11 14 10.6.2002 1,80,000 Bohra Khurd
2. JVG Housing Finance 47 02 23.5.2002. 11,77,500 Sidhrawali
Ltd. 17 18 23.5.2002 4,47,500 Bohra Khurd
4 6 23.5.2002 1,07,500 -Do-
3. JVG Farm Fresh Ltd. 29 5 23.05.2002 7,31,250 Sidhrawali
08 0 10.06.2008 2,00,000 Bohra Khurd
4. JVG Hotels Ltd. 32 8 23.5.2002 8,10,000 Sidhrawali
5. JVG Steels India Ltd. 15 23.5.2002 18,750 Sidhrawali
Total 44,91,250
4.1.6 Shri Dinesh Goyal filed an application on behalf of the
Company M/s. Tirupati Cylinders Pvt. Ltd. under Rule 9 of the
Companies (Court) Rules, 1959, in the matter of RBI vs. M/s.
JVG Finance Ltd. Company Petition No. 265 of 1998. It is
pertinent to mentioned here that the Delhi High Court passed an
order on 3/9/2002 (Annexure-23) to the effect that "prior to
effecting any further sale, alienation, transfer of creation of any
third party interest in any assets of the JVG Group of
Companies, permission of this court should be obtained."
However, all the deals were made before the said date of these
orders.
4.1.7 Investigation further revealed that Shri Dinesh Goyal has
also made sale deed on behalf of M/s. JVG Foods Ltd., M/s.
JVG Petrochemicals Ltd., M/s. JVG Housing Finance Ltd.,
M/s. JVG Hotels Ltd., M/s. JVG Steels Ltd., M/s. JVG
Overseas Ltd. & M/s. JVG Farm Fresh Ltd. He made these sale
deeds in favour of Defence Services Investors Forum, without
any consideration. In this connection a contempt petition has
been filed by investors of JVG Group in the Delhi High Court.
4.1.8 The documents/details submitted by Shri Dinesh Goyal
have been examined. It is noticed that resolution authorising
Shri Vijay Kumar Sharma to make agreement to sell & GPA on
behalf of aforesaid five companies, was found to be fabricated.
As per minute books submitted by some of these companies, it
is seen that the date mentioned in the resolution is false as on
the said date there was no meeting held as per concerned
company‟s records. A copy of such minutes recorded before
and after the said dates is placed at Annexure -24.
xxx
4.1.21 Shri Vijay Kumar Sharma, ex-CMD of the aforesaid
companies appeared before the Inspectors on 5.10.2009 and in
reply to question Nos. 222 to 228, he categorically admitted
that the funds for the purchase of above land were given by
JVGFL. He could not give any cogent reasons for the purchase
of land in the names of other JVG group companies by using
the funds of JVGFL and simply stated that there must have
been some resolution in this regard. On being further asked
about land worth Rs. 16.29 crores (which was registered in the
name of 13 JVG group companies), out of which land
registered in the names of 5 JVG group companies (mentioned
in para 4.1.5 above) was sold, he categorically admitted that a
deal was made between these companies and M/s. Tirupati
Cylinders Ltd. (represented by Shri Dinesh Goyal) but the same
could not be completed due to stay granted by Hon‟ble Delhi
Court. A copy of the relevant extracts of his statement dated
05.10.2009 is placed at (Annexure-26).
4.1.22 In the instant case, Shri Vijay Kumar Sharma, being
Chairman and Managing Director of JVGFL was duly bound as
its director/trustee of company‟s property and its agent to
protect the interests of JVGFL and its various Stakeholders, i.e.
shareholders/depositors and creditors. Shri Sharma instead of
protecting the interests of JVGFL and its stakeholders has in
fact, indulged in siphoning off the company‟s money in
connivance with Smt. Namrata Krishan. He has fabricated false
documents with the help of Smt. Namarta Krishan on behalf of
other JVG group Companies for sale of land of these
companies. He has also kept whole consideration with himself.
JVGFL had collected these funds from innocent public."
25. Hence, the SFIO report notes that the documents/details submitted by
Sh. Dinesh Goyal have been examined. It also concludes that the resolution
authorising Sh. V.K. Sharma to make agreement to sell and GPA on behalf
of the aforesaid five companies of the JVG Group is fabricated. The date
mentioned in the resolution is wrong as on the said date, no meetings were
held as per the company record.
SFIO records the statement of Sh. V.K. Sharma that a deal was made
with Tirupati Cylinder Ltd. but the same could not be completed. However,
the report concludes that Sh. V.K. Sharma being a director was duty bound
to protect the interest of JVG Finance Ltd. and its stake holders. Instead, he
had indulged in siphoning off funds of the Company and fabricated false
documents. The report concludes that Sh. V.K. Sharma instead of protecting
the interest of JVG Finance Ltd. has indulged in siphoning of company‟s
money in connivance with Smt. Namarta Krishan. It also concludes that
Sh.Sharma has fabricated documents. It also concludes that Sh. V.K. Sharma
has indulged in fraudulent conduct of business in the manner as brought
about earlier and is personally responsible without limitation of liability for
the debts and liabilities of JVG Finance Ltd. in terms of Section 542 of the
Act.
26. Another aspect which is relevant here is the stand taken by the OL,
namely, that the resolutions authorising Sh. V.K. Sharma to sell the
aforesaid properties of the five companies in question which are part of the
JVG Group reflect the Registered Office and the Head Office on the date of
the Resolution i.e. May 2002 as 1, Ashoka Park, Main, New Rohtak Road,
New Delhi and B-22, Ansal Chambers-I, Bhikaji Cama Place, New Delhi. It
has been pointed out by the OL in its reply, that in June 1998, the OL has
taken possession of these two properties. Hence, the question of passing
resolutions on the letter heads reflecting the said offices as the Registered
Office and Head Office obviously raises grave suspicion on the genuineness
of the resolution.
27. What follows is that both the reports, namely, the Thareja Committee
Report and the SFIO Report have rejected the claim of the applicant. It is not
in dispute that the agreement to sell and power of attorneys were executed.
The Thareja Committee report however concludes that material evidence
has not been produced and that the transaction is not genuine and bona fide.
The report gravely doubts that any consideration was paid. SFIO in its report
concludes that the resolution authorising Sh. V.K. Sharma to make the
agreement to sell and GPA on behalf of the five stated companies of the
JVG Group are fabricated. The conclusion is unequivocal that Sh. V.K.
Sharma had no authority to execute the said documents and to receive any
consideration for and on behalf of the said companies in cash. The report
unequivocally concludes that Sh. V.K. Sharma has indulged in fraudulent
conduct and has siphoned off the company‟s money. Based on these two
reports, it is quite clear that the transaction which is claimed by the applicant
company cannot be accepted.
28. The applicant has taken strong objections to the aforesaid findings of
the Thareja Committee. According to them, the procedure followed by the
Thareja Committee was illegal and contrary to the principles of natural
justice. The Committee came to a conclusion that the property in question
has been sold to the applicant at throw away rates without giving an
opportunity to the applicant to summon the revenue authorities or to even
cross-examine Sh. V.K. Sharma or Sh. Sushil Kumar Gupta. It is also
pleaded that exhibits X.-1 to X-27 on the basis of which the value of the
property has been ascertained by the Committee were not provided to the
applicant.
On the SFIO report, the learned counsel for the applicant had
strenuously urged that the report accepts the fact that Sh. V.K. Sharma has
made the GPAs and agreement to sell in favour of the applicant and that the
applicant has also paid consideration to Sh. V.K. Sharma. It is pleaded that
these conclusions show that the stand of the applicant has been accepted by
SFIO.
29. The argument raised by learned counsel for the applicant regarding
the SFIO report supporting the case of the applicant is entirely misplaced.
The report in para 4.1.8 clearly spells out that the resolution authorising Sh.
V.K. Sharma to make the agreement to sell and GPA on behalf of the
aforesaid five companies is fabricated. It also concludes that Sh. V.K.
Sharma has fabricated false documents on behalf of JVG Group of
Companies for sale of the land and that he has collected the whole
consideration for himself. The funds for purchase of the land on behalf of
these companies belong to JVG Finance Ltd. which was generated from
innocent public as investments.
Two things stand out as per the report of SFIO. Firstly, Sh. V.K.
Sharma was never authorised to effect this transaction on behalf of the five
companies. Secondly, he has acted in a fraudulent manner and has sought to
siphon off the funds of JVG Finance Ltd. by indulging in these transactions.
In my opinion, these observations and conclusions of SFIO do not in any
manner support the claim of the applicant.
30. Regarding the objections taken to the Thareja Committee report by
the applicant, in my opinion, the objections are misplaced. As noted above,
there is no dispute that the agreement to sell and power of attorney were
duly executed and registered. The issue is as to whether the consideration
was actually paid given the fact that it is claimed to have been paid in cash.
The Thareja Committee report concludes that the relevant documents,
namely, the cash book, ledger, etc. have not been placed on record and
concludes that the transaction lacks bona fide. In my opinion, this
conclusion is supported by so many other surrounding facts and
circumstances which render the objections raised by the applicant to the
Thareja Committee Report completely irrelevant and without merits.
31. Apart from the conclusions drawn against the applicant by the Thareja
Committee and SFIO, there are so many other aspects and circumstances
which are apparent on the face of the record which raises grave doubts about
the bona fide of the transaction. The following aspects/facts clearly stand
out:-
(a) The first aspect is that the applicant claims that the property was
purchased around 2002. It is further claimed that the applicant has physical
possession of the property. This is despite the fact that there is un-rebutted
evidence on record that there is no proper demarcation of the land. Even
assuming that the applicant was in possession of the land in question for the
last 18 years, there would have been surely some utilization of the land.
There would be enough evidence with the applicant to demonstrate their
possession on the land, namely, as to whether they are carrying out any
farming on the land or they are using it for some commercial purpose or that
they have rented out the property. The entire application and the submissions
of the learned counsel for the applicant are completely silent about the same.
There is no attempt to demonstrate that the applicant at any stage exercised
any rights as a title owner for the property in question for the last 18 years/
as a person in physical possession of the property. In the last hearing, it was
urged that the land is being used for agriculture purpose. However, nothing
to support this plea has been placed on record. Any such user of the
property as claimed would have generated income for the applicant
company. Such income would be reflected in its books of account/balance
sheets/income tax records. None of these documents has been produced to
show the manner in which the property is being utilized/is generating
income for the company.
(b) I also cannot help noticing the conduct of the applicant. The applicant
has failed to place on record the income tax records and balance sheets of
the company. If such a purchase of properties had been made, surely the
applicant company would have shown them in their balance sheets and filed
appropriate returns with income tax department. The balance sheets and
relevant income tax record of the applicant would have shown that this land
has been shown as an asset of the company.
(ii) During the hearing a question was posed to the learned counsel for the
applicant as to whether the company Tirupati Cylinders Ltd. has shown
purchase of this property in the income tax records. Learned counsel for the
applicant submitted that he does not have any instructions in this regard.
Learned counsel was then asked as to whether the applicant company is
using the land in question in any manner whatsoever. Learned counsel
replied that perhaps they were using the land. This court further put a
question as to whether the applicant company is receiving any rent from the
land or any profit or revenue from the land. Learned counsel for the
applicant replied that he does not know about the same.
(iii) The absence of these documents raises grave doubts on the bona fide
of the transaction.
(iv) In the above context reference may be had to the judgment of the
Supreme Court in the case of Union of India vs. Ibrahim Uddin & Anr.,
(2012) 8 SCC 148. The Supreme Court in the said case held as follows:-
"12. Generally, it is the duty of the party to lead the best
evidence in his possession, which could throw light on the issue
in controversy and in case such material evidence is withheld,
the court may draw adverse inference under Section 114
Illustration (g) of the Evidence Act notwithstanding, that the
onus of proof did not lie on such party and it was not called
upon to produce the said evidence. [Vide Murugesam
Pillai v. Manickavasaka Pandara [AIR 1917 PC 6],
Hiralal v. Badkulal [AIR 1953 SC 225] , A. Raghavamma v. A.
Chenchamma [AIR 1964 SC 136] , Union of
India v. Mahadeolal Prabhu Dayal [AIR 1965 SC 1755]
, Gopal Krishnaji Ketkar v. Mohd. Haji Latif [AIR 1968 SC
1413] , BHEL v. State of U.P. [(2003) 6 SCC 528]
, Mussauddin Ahmed v. State of Assam [(2009) 14 SCC 541]
and Khatri Hotels (P) Ltd. v. Union of India [(2011) 9 SCC
126]
xxx
24. Thus, in view of the above, the law on the issue can be
summarised to the effect that the issue of drawing adverse
inference is required to be decided by the court taking into
consideration the pleadings of the parties and by deciding
whether any document/evidence, withheld, has any relevance at
all or omission of its production would directly establish the
case of the other side. The court cannot lose sight of the fact
that burden of proof is on the party which makes a factual
averment. The court has to consider further as to whether the
other side could file interrogatories or apply for inspection and
production of the documents, etc. as is required under Order 11
CPC. Conduct and diligence of the other party is also of
paramount importance. Presumption of adverse inference for
non-production of evidence is always optional and a relevant
factor to be considered in the background of facts involved in
the case. Existence of some other circumstances may justify
non-production of such documents on some reasonable
grounds. In case one party has asked the court to direct the
other side to produce the document and the other side failed to
comply with the court's order, the court may be justified in
drawing the adverse inference. All the pros and cons must be
examined before the adverse inference is drawn. Such
presumption is permissible, if other larger evidence is shown to
the contrary."
(v) Clearly, in the facts of this case, it is the averment of the applicant
that it has bonafidely purchased the property from the JVG Group of
Companies in question in 2002. The burden of proof was on the applicant
who has made the factual averment. Withholding and non-production of
facts and documents which would have demonstrated that the applicant has
purchased the property and has been dealing with the property since 2002
as an owner/title holder of the property, clearly permits the court to draw
an adverse inference against the applicant. The best evidence has been
hidden/suppressed by the applicant. This aspect negatives the legality and
validity of the contentions raised by the applicant.
(c) That apart, what stands out is that large consideration is sought to be
paid for sale of the property entirely in cash. This, itself, raises a suspicion
about the bona fide and genuineness of the transaction. There is no reason to
have paid the entire consideration of about Rs. 45 lakhs in cash as is
claimed.
(d) It is also an admitted fact that the original title documents of the land
that were executed in favour of the five companies who are allegedly the
sellers of the land to the applicant, were not taken into possession by the
applicant when the alleged sale was made. It is a standard practice that when
a sale is made all title documents in favour of the seller are handed over to
the purchaser. This is a prudent practice as it ensures that the title documents
are not misused. On the contrary, as per the ex-management, the original
sale deeds were lying with Sh. V.K. Sharma and have been filed by him in
this court. This absence of possession of the original documents of title of
the five companies from whom the land was bought with the applicant itself
raises doubt on the bona fide of the sale transaction.
(e) The SFIO report also notes the conduct of Sh. Dinesh Goyal, the
alleged person-in-charge of the applicant Company-Tirupati Cylinders Ltd.
In para 4.1.7, SFIO notes that the said Sh. Dinesh Goya has made sale deeds
on behalf of JVG Foods Ltd., JVG Petrochemicals Ltd., JVG Housing
Finance Ltd, etc. in favour of Defence Services Investors Forum without any
consideration. It is manifest from these observations that Sh. Dinesh Goyal
was a familiar figure with the JVG Group of Companies and was involved in
some of the transactions relating to JVG Group of Companies/functioning of
the said group. He is not a bona fide third party dealing with the JVG
Group/the five companies in question for a bona fide sale of the properties.
(f) I also cannot help noticing the manner in which the applicant
Company has been lingering along with its so called claim to the title of the
property. On 22.07.2004, this court had referred the matter to the Thaeja
Committee to give its recommendations on the claim raised by the applicant
Company. On 24.11.2005 before the Thareja Committee, a statement was
made on behalf of the applicant that they do not wish to pursue the matter
and sought withdrawal of the petition. Subsequently, on a request made by
the applicant Company, on 10.03.2006 this court permitted the applicant to
approach the Thareja Committee to substantiate its claim again. The Thareja
Committee gave its XIIIth Report dealing with the claim of the applicant on
05.02.2007. It was in 2011 that the applicant, four years after the report had
been given sought to move the court claiming that it had not received a copy
of the report of the Thareja Committee dated 05.02.2007. It is clear that the
applicant have permitted the matter to linger on and have not pursued the
matter/the alleged claim in a diligent manner.
32. The aforesaid facts clearly show that the best evidence that the
applicant had to prove its case has been hidden from the court. The applicant
has failed to place on record its balance sheets and income tax records which
would show that it had the wherewithal to purchase this property and also
that the balance sheets reflect this property as its asset.
No details are given as to how the property is being utilized by the
applicant. It is a valuable piece of land situated on a main road. No details
are forthcoming.
33. I also cannot help noticing the judgment of the Supreme Court in the
case of Suraj Lamp and Industries Pvt. Ltd. Vs. State of Haryana & Anr.,
(2012) 1 SCC 656 wherein the Court has frowned on POA/GPA
transactions. The Court held as follows:-
"23. Therefore, an SA/GPA/will transaction does not convey
any title nor creates any interest in an immovable property.
The observations by the Delhi High Court in Asha M.
Jain v. Canara Bank [(2001) 94 DLT 841] , that the "concept
of power-of-attorney sales has been recognised as a mode of
transaction" when dealing with transactions by way of
SA/GPA/will are unwarranted and not justified, unintendedly
misleading the general public into thinking that SA/GPA/will
transactions are some kind of a recognised or accepted mode of
transfer and that it can be a valid substitute for a sale deed.
Such decisions to the extent they recognise or accept
SA/GPA/will transactions as concluded transfers, as contrasted
from an agreement to transfer, are not good law."
34. In this context, reference may be had to Section 542 of the Companies
Act, 1956 which reads as follows:-
"542. LIABILITY FOR FRAUDULENT CONDUCT OF
BUSINESS.
(1) If in the course of the winding up of a company, it appears
that any business of the company has been carried on, with
intent to defraud creditors of the company or any other persons
or for any fraudulent purpose, the Court, on the application of
the Official Liquidator, or the liquidator or any creditor or
contributory of the company, may, if it thinks it proper so to do,
declare that any persons who were knowingly parties to the
carrying on of the business in the manner aforesaid shall be
personally responsible, without any limitation of liability, for
all or any of the debts or other liabilities of the company as the
Court may direct.
On the hearing of an application under this sub- section, the
Official Liquidator or the liquidator, as the case may be, may
himself give evidence or call witnesses.
(2) (a) Where the Court makes any such declaration, it may give
such further directions as it thinks proper for the purpose of
giving effect to that declaration.
(b) In particular, the Court may make provision for making the
liability of any such person under the declaration a charge on
any debt or obligation due from the company to him, or on any
mortgage or charge or any interest in any mortgage or charge
on any assets of the company held by or vested in him, or any
person on his behalf, or any person claiming as assignee from
or through the person liable or any person acting on his behalf.
(c) The Court may, from time to time, make such further order
as may be necessary for the purpose of enforcing any charge
imposed under this sub- section.
(d) For the purpose of this sub- section, the
expression"assignee" includes any person to whom or in whose
favour, by the directions of the person liable, the debt,
obligation, mortgage or charge was created, issued or
transferred or the interest was created, but does not include an
assignee for valuable consideration (not including consideration
by way of marriage) given in good faith and without notice of
any of the matters on the ground of which the declaration is
made
(3) Where any business of a company is carried on with such
intent or for such purpose as is mentioned in sub- section (1),
every person who was knowingly a party to the carrying on of
the business in the manner aforesaid, shall be punishable with
imprisonment for a term which may extend to two years, or
with fine which may extend to five thousand rupees, or with
both.
(4) This section shall apply, notwithstanding that the person
concerned may be criminally liable in respect of the matters on
the ground of which the declaration is to be made."
35. A Coordinate Bench of this court in the case of Col. M.R. Bakshi vs.
Fintra Systems Ltd. and Anr, 2008 (151) DLT 1 while dealing with section
542 of the Companies Act, 1956 held as follows:-
"10. Having considered the respective submissions I am, as at
present advised, inclined to agree with the submissions of Mr.
Rajiv Shakdher, Sr. Advocate the learned Amicus Curiae.
Keeping in view the purpose for which Section 542 has been
enacted, and the fact that timely action is of the essence, not
only to prevent the presentation of a fiat accompli by the
fraudulent Directors of the company, but also to provide relief
to the victims of the fraud, it seems that the establishment of the
fraudulent conduct for attracting the provision of Section 542 of
the Companies Act does not require the same standard of proof
as in a criminal trial and the rigours of the law of evidence as
apply to a criminal trial would not apply to establish the
commission of fraudulent acts and omissions by the Directors
and managers of a company. It has also to be kept in mind that
by its very nature, fraud is not easy to establish. This is even
more so, when the fraudulent conduct is undertaken by the
Directors of a company, sitting in their own office, with a view
to defraud the creditors/investors who, though the victim of the
fraud, are not involved in the transactions which constitute such
conduct, and may have no personal knowledge of the same. In
K.T. Dharanendrah v. R.T. Authority AIR 1987 SC 1321 the
Supreme Court, while dealing with a case under the Customs
Act, 1962 observed that "An economic offence is committed
with cool calculation and deliberate design with an eye on
personal profit regardless of the consequence to the
Community. A disregard for the interest of the Community can
be manifested only at the cost of forfeiting the trust and faith of
the Community in the system to administer justice in an even
handed manner without fear of criticism from the quarters
which view white collar crimes with a permissive eye
unmindful of the damage done to the National Economy and
National Interest."
36. Reference may also be had to the works of the learned Author 'A
Ramaiya, Guide to the Companies Act, (17th Edition 2010)' where while
dealing with Section 542 of the Act, it is stated as follows:-
"A personal can be held liable for fraudulent trading, if he
assisted in the commission of the fraud. It is not necessary that
he should be actively involved in the management of the
company. The court said that as a matter of ordinary language
the section was not restricted to those who performed a
managerial role. Moreover, the legislative history of the
provision pointed towards a wider interpretation, extending not
only to a person who carried on business or assisted in the
carrying on of the liquidated company's business but also to a
person who had participated in the fraudulent acts of the
company Morris v. Banque Arabe et Internationale
d'ínvestment SA (No2): [2001] 1 BCLC 263."
37. In my opinion, in view of the above stated facts and legal position, the
transaction as alleged by the applicant is not a bona fide act. I concur with
the conclusions of the Thareja Committee. Further, in 2002 when the alleged
transaction took place, the JVG Group of Companies was a sinking ship.
The flagship company of the Group, namely, JVG Finance Ltd. had already
been ordered to be provisionally wound up by order dated 05.06.1998. One
cannot help coming to the conclusion that this transaction was carried out
only to whisk away valuable assets of the JVG Group of Companies which
at that time were likely to go under winding up proceedings.
38. Clearly, the present application has no merit. The application is
dismissed.
JAYANT NATH, J
AUGUST 07, 2020/rb
