Delhi High Court
Bharti Bhagwan Jadhav vs Jvg Finance Ltd on 16 March, 2020
$~23
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CO.APP. 8/2020
BHARTI BHAGWAN JADHAV ..... Appellant
Through: Mr. Ravi Kant Chadha, Senior
Advocate with Ms. Mansi Chadha
and Mr. Sidhant Chaudhary,
Advocates.
versus
JVG FINANCE LTD ..... Respondent
Through: Mr. Dheeraj Gupta, Ms. Titasha
Banerjee, Ms. Sanam Siddiqui and
Ms. Diksha Arora, Advocates for Ex-
Management.
Mr. Kunal Sharma, Advocate for OL.
% Date of Decision: 16th March, 2020
CORAM:
HON'BLE MR. JUSTICE MANMOHAN
HON'BLE MR. JUSTICE SANJEEV NARULA
MANMOHAN, J. (Oral):
C.M. No. 9822/2020 (exemption)
Exemption allowed, subject to all just exceptions.
The application stands disposed of.
C.M. No. 9823/2020 (delay)
Keeping in view the averments made in the application, the same is
allowed and delay in filing the company appeal is condoned.
Accordingly, the application stands disposed of.
CO.APP. 8/2020 & C.M. No. 9821/2020
1. The present appeal has been filed challenging the order dated 10 th
January, 2020 passed by the Company Court in CA No. 2-5/2010 and CA
Co.APP. No.8/2020 Page 1 of 21
No. 34/2011 in CP No. 265/1998 titled as Reserve Bank of India v. M/s
J.V.G. Finance Ltd. By virtue of the impugned order, the objections filed by
the appellants to the Thareja Committee Report were dismissed and the
Official Liquidator was directed to take possession of the four flats in
question forthwith. The official liquidator was held entitled to seek police
protection.
2. Since the impugned order encapsulates the facts and extensively deals
with the submissions advanced by the learned counsel for the appellants, the
relevant portion of the said order is reproduced hereinbelow:-
"15. I may now deal with the above contentions. I may first notice the
observations of this court as stated in order dated 11.05.2005 while
dealing with Co. Appl. No. 892/2000 filed by the ex-management. This
court had recorded the following findings on the claim of the
claimants:-
"17. The next question would be about the genuineness of the
purported transactions. From the aforesaid description, it would
be clear that the authority in favour of Dr.Sukhvir Singh allegedly
flows from some Board Resolution dated 3rd January, 1997.
Further, all the Agreements to sell record Board Resolutions
purporting to accept the proposals of the intervenors for purchase
of respective flats. Therefore, after hearing the arguments, the
Official Liquidator was directed to file minutes of the Board
meetings of the company for period June to August, 1997.
18. On the other hand, payment of entire consideration of Rs.30
lacs in cash by all the four alleged purchasers/intervenors also
puts question mark on the authenticity of the transactions.
Further, if the property was purchased in the years 1997-1998 and
it is not an ante-dated transaction manufactured later but an
honest deal, the intervenors must have shown purchase of these
flats in the income tax returns. Because of this reason the
intervenors were also directed to file income tax returns for the
counting year 1997-98 (assessment year 1998-99) indicating
whether the purchase of flats in question was shown in their
Co.APP. No.8/2020 Page 2 of 21
returns or not. They were also directed to file an affidavit stating
source of Rs.30 lacs purportedly paid in cash for the purchase of
flats in question.
Although two weeks' time was given for this purpose, requisite
affidavits have not come on record. In the absence of these
documents it cannot be conclusively determined as to whether the
transactions in question are genuine or not.
It may be noted that this court has already appointed a One Man
Committee of Mr.G.P.Thareja, retired Additional District Judge,
Delhi who is going into large number of such claims filed by many
applicants claiming to have purchased flats/land etc. from the
company. The claims of these intervenors can also be looked into
by him."
Clearly, this court noted that the claimants have failed to produce
relevant documents to show their titles. However, an opportunity was
granted to the claimants to produce their title documents before the
Thareja Committee.
16. The Thareja Committee has rejected the contentions of the
claimant. I may look at the findings recorded by the Thareja Committee
in the light of the above noted facts. The report dated 22.12.2009
amongst others states as follows:-
(i) The report notes that none of the original document has been placed
on record by the claimants. Study of documents of all the files reflects
for reasons recorded that bogus claims have been preferred by the
AttorneyMr.Tarun Rathi in the name of the four women.
(ii) The Committee notes the statement of accounts filed by Milan
Enterprises on the basis of which it was alleged that the said concern
advanced money to the claimant. This alleged loan was the source of
funds of the claimant to buy the flat. It is also noted that the statement
of accounts does not bear the stamp or certificate of any of the bankers.
The report concludes that scrutiny of the documents would reveal that
not a single penny of the claimants is at stake. Though a string of
borrowing is sought to be created but even at the end of the tunnel
there is no proof regarding the payment of consideration that may
satisfy the judicial conscience. It is further stated that if such borrowing
is made, there is nothing to suggest that an effort was made by the
Co.APP. No.8/2020 Page 3 of 21
persons lending the money to the extent of Rs. 1.20 crores to take back
the money. This conduct itself belies the genuineness of the transaction.
(iii) No original resolution of JVG has been placed on record by the
claimants.
(iv) Regarding the agreement to sell in question, it is stated that the
document is manufactured for the purpose of the claim at a later stage.
(v) The Committee also notes that Dr. Sukhbir Singh has nothing to do
with JVG and that the documents have been filed to commit a fraud
before the Committee.
(vi) The Thareja Committee also records that the claimants have not
appeared in person to support their claim. However, the report
concludes that the documents produced by the OL indicate that it is
Sh.Tarun Rathi who had been allegedly occupying the flats after
breaking the seal of the Official Receiver of the Bombay High Court.
Further it concludes that bogus claims have been made by the said
Sh.Tarun Rathi. Had the claims been genuine, the claimants would
have appeared in the witness box to submit their claims of the flats.
(vii) On the deposition of witnesses, the Committee states as follows:-
"1. I have scrutinized the deposition of Sh. Rathi, POA holder for
all four files. His deposition clearly indicates that he has no
personal knowledge about the transaction. The documents which
he referred in his deposition have already been considered. His
deposition is not of any worth particularly because no cogent
reason has been given as to why the claimants have not appeared
to support their claims. Moreover, a bunch of documents
submitted by way of Report by Ms. Richa Kukreja, Dy. Official
Liquidator with annexure indicate that it is Tarun Rathi who has
illegally occupied the flats after breaking of the seal of the
Official Receiver of Bombay. This clearly indicates that bogus
claimants have been made to stand by Sh. Rathi. Had the
claimants been genuine they would have appeared in the witness
box to support the claim of flat. The correspondence produced on
record by the Official Liquidator which consists of the
application submitted to the Official Liquidator by Sunita
Aggarwal whereby she sought three weeks time to vacate the flat
shows that the claimants have no capacity to acquire the flats
and there is no claim of the claimant as has been set up through
Sh. Rathi. Similarly claimant Swati Verma has sought three
Co.APP. No.8/2020 Page 4 of 21
weeks time for vacating the flat. These applications of the
claimant further negate the deposition of Sh. Tarun Rathi. The
statement of Sh. Tarun Rathi is otherwise also rejected.
2. Another witness who has been examined is Sh. Sudhir Kumar.
The documents reference to which has been made in his
deposition has already been rejected. His oral evidence is of no
worth. Moreover, Sudhir Kumar claims to have participated in
the alleged transaction of loan but there is nothing on record to
suggest the consideration for which he participated in the said
transaction. Material on record indicates, as already noted, that
he has aided the claimants and their attorney in the matter of
false claims preferred by the said claimants.
3. Another witness examined is Sh. Sukhbir Singh. This witness
has tried to help and aid the claimant by supporting the story set
up by the claimant. This witness as per documents produced on
record by the claimant was never a director in JVG Finance Ltd.
And he went to the extent of making the false statement that he
was a director in the said company. He has tried to develop the
story that the flat had to be transferred to the claimant on
account of the urgent necessity of JVG Finance to satisfy the
investors. This witness in his deposition has admitted about the
enquiry by the RBI and also admitted that alleged money was
received without resolution and in cash. He has also not
explained where he deposited this huge amount of Rs. 1.20
crores. Instead he deposed that he does not remember the date of
deposit nor does he have any record. He further deposed that it
was V. K. Sharma who introduced him to Sh.Tarun Rathi. I have
gone through his deposition. It is not worth to be relied upon.
Since the documentary evidence produced by the claimant in the
form it has been produced has already been rejected. I need not
further dilate upon his testimony.
4. The last witness examined is Sh. M. N. Wadhwa, Chairperson
of the Panchtantra Society. The said society was constituted on
26.06.2001. He supported the version of the Official Liquidator
that the flats belong to JVG Finance Ltd. In flat No. 104 Sh. V.K.
Sharma stayed in the year 2002-2003. After 20003 none stayed
Co.APP. No.8/2020 Page 5 of 21
until new occupants forcibly broke open the seal and occupied
the said flat. He deposed that in flat no. 504 and 505 Swati
Verma and Sunita Aggarwal were staying. They were there
before the societies were formed but new persons were staying in
the said flats at the time the deposition was made and they had
left the flats. Neither Swati Verma nor Sunita Aggarwal are the
members of the society. He produced the documents exhibit
OW1/1-6. Sunita Aggarwal sought the membership but she was
not made member as the agreement she gave had no stamp duty
paid nor were registered. The letter Exhibit OW1/10/1 dated
26.06.2001 produced by Sh. Wadhwa shows that flat no. 104 is
unoccupied. In flat no. 105 servants often change. In flat no. 504
Pradeep Aggarwal runs some office. In flat no. 505 also some
office is run and Swati Verma does not reside there. Under the
circumstances the deposition of Mr.Wadhwa is also of no
assistance to the claim of claimants."
17. Based on the above conclusions, the Thareja Committee rejected
the claim of the claimants.
18. I now have a look at the nature of documents produced by the
claimant-Ms.Bharti Bhagwan Jadhav to claim her title to the flat in
question. The documents include Exhibit P-1 which is a GPA executed
by the claimant in favour of Mr.Tarun Rathi. Thereafter to prove the
transaction, the claimant produced Exhibit P-2 a communication dated
14.07.1997 addressed by the claimant to JVG wherein she states that
Flat No. 104 in question has been agreed to be sold to her for a
consideration of Rs. 30 lakhs which amount was enclosed alongwith
said communication as full and final payment of said flat in cash. The
letter also has a thumb impression allegedly of the claimant. On the
same date Dr. Sukhbir Singh (presumably) issued a cash receipt of
Rs.30 lakhs on behalf of JVG stating that the proposal has been
accepted by the Board of Directors and the agreement to sell was
purportedly entered on 17.07.1997 copy of which is Exhibit P-4. By the
said agreement it is claimed that the property has been sold to the
claimant. This document was again allegedly executed by Dr. Sukhbir
Singh and Ms. Bharti Bhagwan Jadhav (by affixing her thumb
impressions) on the document. A letter dated 17.07.1997 was also
written by JVG to the claimant handing over possession/keys of the flat.
Co.APP. No.8/2020 Page 6 of 21
The above photocopies of unregistered documents are the sum and
substance of the title papers of the claimant.
19. To prove the source of funds to purchase the flat, Ms.Bharti
Bhagwan Jadhav has filed some documents which include a copy of a
letter written by one Sh. Sudhir Kumar, Power of Attorney Holder of
Mr.Mukesh C. Shah of Milan Enterprises dated 02.06.1997 whereby it
is proposed to give a loan of a sum of Rs. 30 lakhs against the security
/purchase of the property being Flat No. 104 to the claimant. A
photocopy of a statement of account is placed on record to try and
show adequate funds in the account of Milan Enterprises. Exhibit P-8 is
an acknowledgement of receipt of Rs. 30 lakhs allegedly received from
Sh. Mukesh C. Shah by Ms.Bharti Bhagwan Jadhav. Some notices were
sent to Ms.Bharti Bhagwan Yadhav for refund of the money.
20. In this context there are two interesting letters which are placed on
record to show as to how the sum of Rs. 30 lakhs was generated by
Ms.Bharti Bhagwan Jadhav. One NE Electronic Ltd. on 22.08.1997
offered to sell to Ms.Bharti Bhagwan Jadhav shares worth Rs.30-35
lakhs (approximately). The said NE Electronic Ltd. forwarded the
shares to Ms.Bharti Bhagwan Jadhav on 22.08.1997 without receipt of
sale consideration. These shares have been subsequently forwarded to
Sh.Mukesh C.Shah through the Power of Attorney Holder Sh.Sudhir
Kumar as return of the loan of Rs.30 lakhs that was received from the
said Sh. Mukesh C. Shah/the concern Milan Enterprises. No
consideration has been paid by Ms.Bharti Bhagwan Jadhav to NE
Electronic Ltd. for the shares bought from the said company. Some
reminders allegedly received from NE Electronic Ltd. addressed to
Ms.Bharti Bhagwan Jadhav have been placed on record where the said
NE Electronic Ltd. seeks payment of Rs. 30 lakhs with interest for the
shares purchased by Ms.Bharti Bhagwan Jadhav. The chain of
documents ends there. So as per this chain, Ms.Bharti Bhagwan Jadhav
still owes Rs.30 lakhs to NE Electronic Ltd. for the shares bought. That
is the manner in which it is claimed that Ms.Bharti Bhagwan Jadhav
generated funds for purchase of the flat in question.
21. It is clear that the nature of documents placed on record cannot
inspire confidence of a court of law. As already noted above, RBI
passed a prohibitory order against JVG on 10.10.1997. As per the said
Co.APP. No.8/2020 Page 7 of 21
order, JVG was restrained from selling any assets without necessary
permission of RBI. The documents above show that the sale transaction
appears to have been carried out hastily before the prohibitory order
was passed by RBI on 10.10.1997. By means of unregistered
documents, sale of a valuable immovable property is sought to be done.
The consideration was allegedly paid in cash by the claimant who
cannot sign her name. There is no record with JVG showing receipt of
this money.
To show that the claimant had the means to pay the
consideration for the flat, some more suspicious documents are placed
on record. One Sh.Mukesh C. Shah (Milan Enterprises) through his
Power of Attorney Holder Sh. Sudhir Kumar executes a communication
dated 02.06.1997 giving a loan to the claimant of Rs. 30 lakhs, that too
in cash. Admittedly, the claimant is unable to refund the loan. The
claimant thereafter on 22.08.1997 without paying any amount pursuant
to an agreement buys shares of three different companies allegedly
worth Rs. 30 lakhs. These shares for which no consideration is paid by
the claimant are thereafter sought to be handed over to Sh. Mukesh C.
Shah, the proprietor of Milan Enterprises through POA Holder Sh.
Sudhir Kumar in lieu of return of the loan amount of Rs. 30 lakhs.
There is nothing to show that the seller of the shares, namely, NE
Electronic Ltd. was ever paid the consideration for purchase of the
shares by the claimant. One cannot but concur with the view taken by
the Thareja Committee that the documents are nothing but a
camouflage to show as to how the claimant has come in possession of
the sum of Rs. 30 lakhs to pay the consideration for the flat in question.
In fact the claimant have with no personal contribution of funds have
allegedly managed to buy a flat for Rs.30 lakhs.
22. Apart from the nature of the above documents placed on record as
noted above, there are other aspects which persuade me to confirm my
conclusion that the claimants have failed to discharge their duty to
show their title to the flats in question. I may note these aspects also.
23. Firstly, I may note that this court on 11.5.2005 heard arguments on
CA 892/2000 and reserved judgment. The Court had directed the
claimants to file their Income Tax Return for the Accounting Year
1997-98 Assessment Year 1989-99 indicating whether the purchase of
the flats in question was shown in their Income Tax Returns or not.
Co.APP. No.8/2020 Page 8 of 21
They were also directed to file an affidavit stating the source of Rs.30
lacs which they claim to have paid in cash as consideration for
purchase of the flats. This Court while disposing of CA 892/2000 by
judgment dated 4.7.2005 noted that despite the above order of this
court the claimants have failed to file the Income Tax Returns for the
relevant period or to file the concerned affidavit stating the source of
Rs.30 lacs. I may note that the Income Tax Returns have still not been
placed on record by the claimants to show that they have declared
purchase of this flat in their said returns.
24. The second aspect which needs to be noticed is that the claimants
have failed to step into the witness box and lead their evidence. A
power of attorney holder Shri Rathi has referred to the said alleged
title documents in his deposition. The Supreme Court in Janki Vashdeo
Bhojwani and another vs. Indusind Bank Ltd. and Others, (2005) 2
SCC 217 on the evidence of an Attorney Holder held as follows:-
"17. On the question of power of attorney, the High Courts have
divergent views. In the case of Shambhu Dutt Shastri v. State of
Rajasthan [(1986) 2 WLN 713 (Raj)] it was held that a general
power-of-attorney holder can appear, plead and act on behalf of
the party but he cannot become a witness on behalf of the party.
He can only appear in his own capacity. No one can delegate the
power to appear in the witness box on behalf of himself. To appear
in a witness box is altogether a different act. A general power-of-
attorney holder cannot be allowed to appear as a witness on
behalf of the plaintiff in the capacity of the plaintiff.
18. The aforesaid judgment was quoted with approval in the case
of Ram Prasad v. Hari Narain [AIR 1998 Raj 185 : It was held
that the word "acts" used in Rule 2 of Order 3 CPC does not
include the act of power-of-attorney holder to appear as a witness
on behalf of a party. Power-of-attorney holder of a party can
appear only as a witness in his personal capacity and whatever
knowledge he has about the case he can state on oath but he
cannot appear as a witness on behalf of the party in the capacity
of that party. If the plaintiff is unable to appear in the court, a
commission for recording his evidence may be issued under the
relevant provisions of CPC.
Co.APP. No.8/2020 Page 9 of 21
....
21. We hold that the view taken by the Rajasthan High Court in
the case of Shambhu Dutt Shastri (supra) followed and reiterated
in the case of Ram Prasad (supra) is the correct view. The view
taken in the case of Floriano Armando Luis [(2002) 2 Bom CR
754] cannot be said to have laid down a correct law and is
accordingly overruled."
25. Clearly, a Power of Attorney holder of a party can appear as a
witness in his personal capacity. He cannot appear as a witness on
behalf of a party. In the present case the claimants themselves have not
appeared in the witness box. It is a Power of Attorney Holder who has
appeared as a witness on behalf of the alleged title holders of the flat.
The Thareja Committee has rightly discarded the evidence of the Power
of Attorney Holder as to no effect.
26. The third aspect that I may note which aspect has also been noted
by the Thareja Committee is that the claimants have failed to file the
original title documents on the basis of which JVG Finance Limited
became the owner of the flats in question. It is claimed that these
original documents are in the custody of the OL but no credible
evidence to that effect has been placed on record. A purchaser of
immovable property will normally be in possession of title papers by
which the seller of the property claims title.
27. I may also note that the SFIO in its report dated 11.02.2010 has
also commented upon the alleged sale of the said flats. The SFIO
concludes as follows:-
"4.6.11 From the above it is clear that these four ladies were
used as front persons to camouflage the dubious sale of these
flats by Shri Sukhbir Singh to these ladies. These flats were the
properties of M/s JVG Finance Ltd. and were sold
unauthorisedly and the proceeds of sale were misappropriated by
Shri Vijay Kumar Sharma and Shri Sukhbir Singh. The funds of
the company were thus siphoned off by Shri Vijay Kumar Sharma
in connivance with Shri Sukhbir Singh."
28. Hence, the SFIO has concluded that these are fictitious transactions
and only a mechanism to siphon the funds by the ex-management
through Dr. Sukhbir Singh, the alleged signatory of the documents in
question and Mr.V.K.Sharma.
29. In my opinion, the claimants have not been able to show any reason
as to why the findings recorded by the Thareja Committee are
erroneous or are liable to be set aside. Facts speak for themselves.
30. 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."
xxx xxx xxx xxx
33. Clearly, given the fraudulent acts undertaken under deceit and
camouflage, herein the standard of proof required to prove such
fraudulent conduct would necessarily be less. In my opinion, the
claimants have completely failed to prove their title to the properties in
question. The documents, namely, agreement to sell and the receipt
placed on record are make belief. The sale of immovable properties
said to have been effected through the unregistered agreement to sell
and the alleged receipt of consideration in cash raises grave suspicion
on the validity of the sale. The claimants have failed to discharge their
onus to prove their title to the properties.
34. I may now deal with another plea strongly raised by the learned
senior counsel for the claimant, namely, reliance on the compromise
decree passed by the Bombay High Court in favour of the claimant. The
compromise decree is based on consents term which reiterates the
alleged transaction of sale of the flat.
35. In the case of Ms.Bharti Bhagwan Jadhav the decree was passed
on 21.01.2000. A perusal of the decree shows that the consent terms
were filed between the plaintiff-Ms.Bharti Bhagwan Jhadva and JVG
Finance Ltd. which are said to have been signed by Dr. Sukhbir Singh
and Ms.Bharti Bhagwan Jadhav by affixing her thumb impressions on
the consent terms dated 21.01.2000. It is an admitted fact that on that
date, the OL had already been appointed as the Provisional Liquidator
vide order dated 05.06.1998. Under section 450 of the Companies Act
the OL was in possession of the entire assets of the company on that
date. Under section 446 of the said Act, no proceedings could have
been continued against the respondent Company without prior
permission of this court. The act of Dr. Sukhbir Singh entering into the
settlement terms and not informing the Bombay High Court about the
appointment of the OL as Provisional Liquidator is a fraudulent act
and an attempt to overreach the orders of this court.
36. In any case, in my opinion, this court vide order dated 04.07.2005
has already held that the said decree of the Hon‟ble Bombay High
Court is not binding. This court held as follows:-
"16. Furthermore, on the very first date in all these suits and
without notice to the Official Liquidator, Dr. Sukhvir Singh
appeared through counsel and consent terms were filed on the
basis on which suits were decreed. The Bombay High Court was
not informed about the liquidation proceedings or the appointment
of the provisional liquidator by this court. In fact, it appears, there
is no averments made about this order in the suits filed. The
company is impleaded as the defendant and after the appointment
of the provisional liquidator, it is only he who could represent the
company. It is, thus, clear that not only the proceedings in the
suits were impermissible as they were initiated without the leave of
the court, even they appear to be collusive a well. Such a decree
will neither be binding on the official Liquidator or the company
and would be void. It is not necessary to take steps for recall of
those decrees by filing appropriate proceedings in those sutis. The
Company Court seized with liquidated proceedings has ample
power to pass necessary directions in this behalf. This aspect is
succinctly explained and elaborated by the supreme Court in the
case of Sudarsan Chits (I) Ltd. vs. G. Sukumaran Pillai and
Others reported as AIR 1984 SC 1579."
37. The Division Bench of this court on 18.07.2006 in appeal did not
set aside the above conclusion. The said order dated 04.07.2005 held
as follows:-
"Co.App. No. 74-77/2005 and CMs. 7728-29/2006
This appeal can be disposed of as the learned Company
Judge has only given direction that the appellants were only to
show the source of Rs.30 lacs paid by each of them in cash and
therefore, the direction was given to the official liquidator to take
possession of the flats immediately as prima facie transactions do
not appear to be genuine. It was further stated in the order passed
by the learned Company Judge that intervenors were to establish
by necessary documentary evidence that they were the genuine
purchasers then only orders for restoration of possession can be
passed at that time Counsel for the appellant has contended that
they have got the documentary evidence with them and same can
be filed in this Court.
We think that it is not necessary to keep the appeal pending.
The documents can be filed before Shri G.P. Thareja who has
been appointed by the Company Court to investigate about the
genuineness of the purchase of the flats in question by the
appellant. In view of the fact that the appellants are claiming to be
in possession of the flats from 1997 as has been told to us by the
counsel for the appellant. We direct the appellant to file necessary
documents before Shri G.P. Thareja within one week. Shri. G.P.
Tharja will hear and decide after giving notice to the parties about
the genuineness of the purchase of the flats in question on the
basis of the documents within a period of eight weeks. The
appellants will continue in possession of the flats till the decision
is made by Shri G.P. Thareja. Mr. Jayant Bhusan says that the
statement of the counsel for the appellant is not correct as they are
in possession of the flats through Raj Nandini Entertainment Pvt.
Ltd., and the appellants are not in possession which statement is
refuted by the counsel for the appellants. This is the issue that
Thareja Committee will decide.
Appeal stands disposed of."
38. Clearly, the Division Bench in its order dated 18.07.2006 did not
set aside the findings recorded by the Coordinate Bench of this court on
04.07.2005 as to the effect that the decree passed by the Bombay High
Court would be void and would not bind the official liquidator. The
said finding remains in operation.
39. Even otherwise, it is manifest that the order passed is contrary to
the statutory provisions and not binding. Reference may be had to
Sections 446 and 456 of the Companies Act, 1956 which read as
follows:
40. Section 446(1) of the Companies Act 1956 reads as follows:-
"446. Suits stayed on winding up order.
(1) When a winding up order has been made or the Official
Liquidator has been appointed as provisional liquidator, no suit
or other legal proceeding shall be commenced. or if pending at the
date of the winding up order, shall be proceeded with, against the
company, except by leave of the Court and subject to such terms
as the Court may impose.
41. Section 456(1) of the Companies Act 1956 reads as follows:-
"456. Custody of company' s property. (1) Where a winding up
order has been made or where a provisional liquidator has been
appointed, the liquidator 2 or the provisional liquidator, as the
case may be,] shall take into his custody or under his control, all
the property, effects and actionable claims to which the company
is or appears to be entitled.
42. Hence, on passing of an order of appointment of a Liquidator, the
Liquidator/Provisional Liquidator takes into custody all the properties,
effects, etc. of the company. Similarly, under section 446 of the Act
after the OL has been appointed as the Provisional Liquidator no suit
or other legal proceedings could be proceeded with against the
company except with the leave of the court. When the consent decrees
have been passed in 2000 the OL had already been appointed as the
Provisional Liquidator in 1998. The suit in question pending before the
Bombay High Court could not proceed further in any manner. The
claimants and the alleged attorney of JVG Dr.Sukhbir Singh have
fraudulently withheld this information from the Bombay High Court
and got the suit decreed based on alleged consent terms. The said
Dr.Sukhbir Singh also had ceased to have any authority as an alleged
director on that date to sign the consent terms. Clearly, the said decree
is not binding on the OL and is of no effect."
3. Mr. Ravi Kant Chadha, learned senior counsel for the appellants states
that the agreements to sell were duly signed between the parties as well as
exhibited before the Thareja Committee and even the consideration amount
had been paid, prior to a provisional liquidator being appointed. In support
of his contention, he relies upon the report of the Serious Fraud Investigation
Office (hereinafter referred to as 'SFIO') dated 11th February, 2010 wherein
it has been held as under:
''4.6.11 From the above it is clear that these four ladies were
used as front persons to camouflage the dubious sale of these
flats by Shri Sukhbir Singh to these ladies. These flats were the
properties of M/s JVG Finance Ltd. and were sold
unauthorisedly and the proceeds of sale were misappropriated by
Shri Vijay Kumar Sharma and Shri Sukhbir Singh. The funds of
the company were thus siphoned off by Shri Vijay Kumar Sharma
in connivance with Shri Sukhbir Singh."
4. He submits that on account of consideration amount having been
received and title documents having been executed by Dr. Sukhbir Singh for
JVG Finance Ltd. (the company in liquidation), the appellants were
protected under Section 53A of the Transfer of Property Act.
5. Learned senior counsel for the appellants further submits that the
learned Single Judge fell in error in holding that non-stepping of the
appellants in the witness box was fatal. He states that there was no necessity
for the appellants to step into the witness box as their power of attorney
holder had executed agreements to sell and further the said agreements had
been duly exhibited by him. In support of his submission, he relies upon
Bhimappa & Ors. Vs. Allisab & Ors. reported in 2007 (6) KarLJ 286, Syed
Abdulkhader Vs. Rami Reddy & Ors. reported in 1979 SCC (2) 601 as well
as the order dated 05.10.2010 passed by the Hon'ble Supreme Court in
C.A.Nos.147-148/2001 titled as Man Kaur (D) by LRs. Vs. Hartar Singh
Sangha.
6. Mr. Chadha lastly submits that in view of the Division Bench order
dated 18th July, 2006, the earlier order of the learned Single Judge dated 04th
July, 2005 holding the consent decrees passed by the Bombay High Court in
favour of the appellants to be null and void stood set aside. He emphasizes
that the applications on which the Company Court had initially set aside the
consent decrees passed by the Bombay High Court in favour of the
appellants were not maintainable as they had not been filed by the Official
Liquidator but by the Ex-Management i.e. V.K. Sharma, Ex-Managing
Director.
7. Per contra, Mr. Dheeraj Gupta, learned counsel for Mr.V.K. Sharma,
the Ex-Management submits that the present appeal is not maintainable as it
is in the nature of a second appeal. In support of his submission, he relies
upon the judgment of the Allahabad Court in U.P. Cement Vetanbhogi
Sahkari Rin Samiti Ltd. v. Official Liquidator in the matter of M/s. U.P.
State Cement Corporation Ltd., Allahabad, 2010 (2) ALJ 483 wherein it
has been held as under:
"20. In view of the foregoing discussion, it is clear that even if
under Section 483, there was no condition prohibiting an appeal
against an order of the learned Single Judge passed in appellate
exercise of jurisdiction, the said exclusion has been now
specifically provided in by the Legislature under Section 100-A
C.P.C. The judgment of the Apex Court in Kamal Kumar
Dutta (supra) applies with full force in the facts of the present
case.
21. In the present case, the order impugned was passed by the
learned Single Judge in Civil Misc. Appeal/Objection 85/2007.
An application for correction was moved in the order which has
also been rejected. The learned Single Judge decided the
appeal/objection against the report of the Official Liquidator
exercising power under Rule 164 of the Company Rules.
22. Rule 164 of the Company Rules is quoted below:
"164. Appeal by creditor.- If a creditor is dissatisfied with
the decision of the Liquidator in respect of his proof, the
creditor may, not later than 21 days from the date of service
of the notice upon him of the decision of the Liquidator,
appeal to the Court against the decision. The appeal shall
be made by a Judge's summons, supported by an affidavit
which shall set out the grounds of such appeal, and notice of
the appeal shall be given to the Liquidator. On such appeal,
the Court shall have all the powers of an appellate Court
under the Code."
23. The application moved for correction in the order passed in
the appellate exercise of jurisdiction by the learned Single Judge
clearly bars further appeal under Section 483 of the Companies
Act, as well as Letters Patent as laid down by the Apex Court in
the case of Kamal Kumar Dutta (supra)."
8. Mr. Kunal Sharma, learned counsel for the Official Liquidator submits
that the order dated 4th July, 2005 passed by the Company Court cannot be
assailed in the present proceedings as it has attained finality in view of the
earlier Division Bench's order dated 18th July 2006.
9. Having heard learned counsel for the parties, we are of the opinion
that the present appeal is maintainable as it is not in the nature of a statutory
second appeal. In the present case, the initial claims were decided not by the
Official Liquidator but by a Committee appointed by a Division Bench.
Consequently, the preliminary objection raised by the learned counsel for the
Ex-Management is rejected.
10. We are, however, in agreement with the finding of the learned Single
Judge that the appellants had failed to prove their ownership to the flats in
question as they had not produced any original title documents, but only
photocopies. Even during the course of hearing, it was admitted before us
that the appellants had not produced their income tax returns to prove the
payment of consideration to M/s J.V.G. Finance Ltd. despite being
repeatedly asked by the learned Single Judge.
11. Moreover, the purchasers under the alleged title documents i.e. the
appellants had not stepped into the witness box. The argument of the
appellants that there was no necessity in the present case for the appellants to
step into the witness box is contrary to facts and untenable in law. It is
settled law that to succeed in a suit for specific performance (which is the
nature of the claim filed by the appellants), the appellants had to prove that a
valid agreement of sale was entered into by the company in liquidation in
their favour and also the terms thereof; that the company in liquidation
committed breach of the said agreements; and the appellants were always
ready and willing to perform their part of the obligations in terms of the
agreement. If the appellants had to prove that they were always ready and
willing to perform their part of the agreement, that is, to perform their
obligations in terms of the contract, necessarily they should have stepped
into the witness box and given evidence that they had all along been ready
and willing to perform their part of the contract and subjected themselves to
cross-examination on that issue. Appellants could not obviously examine in
their place, their attorney holder who did not have personal knowledge of
their readiness and willingness. Readiness and willingness refers to the state
of mind and conduct of the purchaser as also his/her capacity and
preparedness on the other. One without the other is not sufficient.
Therefore, a third party who has no personal knowledge and is not an
immediate relative cannot give evidence about such readiness and
willingness, even if he/she is an attorney holder of the person concerned.
[See: Man Kaur (D) by LRs. vs. Hartar Singh Sangha (supra)].
12. This Court is also of the opinion that the consent decrees dated 04th
January, 2000, 06th January, 2000 and 21st January, 2000 passed by the
Bombay High Court cannot be said to be legal, valid and subsisting by virtue
of the order dated 04th July, 2005 passed by the Company Court, which has
attained finality. Further, the argument of learned senior counsel for the
appellants that the Division Bench order dated 18 th July, 2006 had set aside
the order dated 04th July, 2005 of the Company Court is untenable in law, as
in that eventuality, there was no question of the said Division Bench
directing the appellants to prove their title before a Committee under the
chairmanship of Mr. G.P. Thareja. The necessity to prove the title before the
Committee arose only because the consent decrees passed by the Bombay
High Court were invalid.
13. Also, the maintainability of the application which led to the passing of
the order dated 4th July, 2005 in our opinion cannot be challenged today as
much water has flown since then and the said order had not been set aside by
the Division Bench in the earlier round of litigation despite such a plea being
advanced before the said Bench.
14. As far as the reference to the SFIO report is concerned, this Court is of
the view that SFIO is an investigating agency and its report is neither final
nor binding. The appellants had to prove their titles dehors the SFIO report
- which they have failed to do in the present case.
15. In any event, the SFIO report itself concludes that the flats had been
sold unauthorizedly by the Ex-Management and no money had been
received in the account of the company itself.
16. Keeping in view the aforesaid as well as the fact that the appellants
have failed to step into the witness box and/or prove the payment of any
consideration amount to the company in liquidation, there is no question of
Section 53A of the Transfer of Property Act being attracted to the present
proceedings.
17. Accordingly, the present appeal being bereft of merits is dismissed
and the pending application stand disposed of on account of it being
infructuous.
MANMOHAN, J
SANJEEV NARULA, J
MARCH 16, 2020
nk/KA
