Delhi High Court
Pacific Convergence Corpn. Ltd. vs Data Access (India) Ltd. on 5 July, 2024
Author: Dharmesh Sharma
Bench: Dharmesh Sharma
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on : 07 May 2024
Judgment pronounced on : 05 July 2024
+ CO.PET. 292/2004
PACIFIC CONVERGENCE CORPN LTD. ......Petitioner
Through: Mr. Y.P.Narula, Sr. Advocate
with Mr. Abhay Narula,
Advocate for Canara Bank.
versus
DATA ACCESS (INDIA) LTD. ..... Respondent
Through: Mr. Sandeep Sethi, Sr.
Advocate with Ms. Riya
Kumar, Ms. Pallavi Shali, Ms.
Shambhavi Mishra and Mr.
Sumer Dev Seth, Advocates for
SMS Textiles.
Mr. D. Bhattacharya, Standing
Counsel for OL.
CORAM:
HON'BLE MR. JUSTICE DHARMESH SHARMA
CO.APPL. 1864/2011, CO.APPL. 3176/2016
1. The above-noted applications have been moved on behalf of
the applicant - SMS Textiles Limited, under Section 446 of the
Companies Act of 19561, read with Rule 9 of the Companies (Court)
Rules, 1959, seeking directions against the Official Liquidator to
handover vacant possession of the property situated at Plot No. 43/6,
Block No.E, as per the layout plan of Okhla Industrial Area Phase-II,
New Delhi, measuring approximately 622.50 sq. yards (hereinafter
referred to as the 'property in question'). In CO.APPL. 3176/2016, the
1 The Act
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applicant has also sought direction to the Official Liquidator to make
payment of compensation of Rs. 5 lacs per month since the date of
possession of the property in question.
2. Briefly stated, it is the case of the applicant that it had
purchased the property in question for a valuable consideration of Rs.
1,35,00,000/- from M/s. Jasai Exports Private Limited through its
Managing Director - Mrs. Guljit SP Singh, by way of a registered
Sale Deed dated 14.03.2005. Further, it is stated that the company (in
liquidation) - Data Access (India) Ltd. (hereinafter referred to as
'DAIL') was a tenant of the erstwhile owner, from whom the applicant
purchased the property in question. The lease deed (titled as a
"License Deed") entered into between original owner of the property
in question and the company (in liquidation) is dated 02.06.1999
(Annexure A-2 in CO.APPL. 3176/2016) and extends for a maximum
term of 9 years. A perusal of the same suggests that the company (in
liquidation) was granted permission to use the basement and first floor
of the factory premises to carry out its business activities.
3. A company petition seeking winding up was instituted against
DAIL and vide order dated 26.10.2004, a Provisional Liquidator was
attached to the company, and thereafter, vide a detailed order dated
18.11.2005, the company was ordered to be finally wound up and the
Official Liquidator was appointed as its Liquidator, with the direction
to take charge of the assets and effects of the company. In doing so,
the Official Liquidator also took possession of the property in question
and sealed the premises on the basis of the fact that the movables and
records of the company were in the premises.
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4. Reply dated 21.05.2012 has been filed on behalf of the Official
Liquidator wherein it is stated that the averments made in the
application cannot be substantiated in the absence of original
documents being placed on the record. It has further been contended
therein that the Official Liquidator is not liable to pay any
compensation/rent/user charges in respect of the property in question.
5. A reply has also been filed on behalf of Canara Bank, a secured
creditor of the company (in liquidation), wherein it is contented that
the present application is not maintainable as it is not supported by
any documents, and that the lease/license deed dated 02.06.1999
relating to the property in question is not a registered document, and
therefore, cannot be relied upon. It is further stated therein that the
applicant has no locus standi in the present matter as the applicant is
not the original owner of the property in question, with whom the
company (in liquidation) entered into the concerned lease/license
deed. In this regard, it is stated that the applicant can move an
appropriate Civil Suit seeking possession subsequent to being granted
permission of this Court under Section 446 of the Companies Act,
1956.
6. Additionally, it is submitted that in view of the larger
conspectus of the winding up petition pending against the company (in
liquidation), it is rather claimed that the property in question be
attached in these liquidation proceedings and be duly auctioned so as
to recover the amounts which are alleged to have been transferred
fraudulently by one Mr. K.C. Palanisamy. In this regard, the non-
applicant/Bank has placed reliance on certain search records sought
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from the Registrar of Companies (Annexure-B to the Reply dated
01.01.2013) and it is stated that the said records reflect that the
property in question belongs to Mr. K.C. Palanisamy, and further, that
the said property was purchased by him using the funds he diverted
from the company (in liquidation). It is urged that this is an attempt to
take possession of the property which has been purchased using the
funds of the company sought to be wound up.
ANALYSIS & DECISION:
7. I have given my thought consideration to the contentions raised
by the rival parties and have also meticulously perused the record of
the present applications as also these winding up proceedings.
8. First things first, it would be apposite to consider the
observations made by this Court during the course of hearings
accorded in the present petition for winding up, specifically the
observations that pertain to the diversion of funds by the Ex-
Management as also the fraud played upon the Canara Bank, being the
secured creditor of the company (in liquidation) vide order dated
18.11.2005, which read as under:
"63. Admitted facts are that since the bank/consortium had to
receive substantial amount, on 9th July, 2004, the company sent a
letter to the bank informing that it was arranging a sum of Rs.75
crores to Rs.125 crores from an investor in order to augment the
working capital and improve the cash flow. Thereafter, vide letter
dated 23rd July, 2004 the company requested the bank to open a no
lien escrow account in the name of the company for repayment of
proposed loan of Rs.75 crores to the investors in 60 monthly
installments. Accepting this request, the bank opened an escrow
account in the name of the company on 24th July, 2004. Thereafter,
two letters dated 12th August, 2004 were received by the bank from
Mr.Ray and Mr. R.Karunanidhi and other signed by Mr. K.C.
Palaniswamy. These were with regard to investors fund of Rs.75
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crores and it is clear from these letters that the companies, namely,
KCPAHL and CHPL were the notified investors and the amount
receivables from M/s Data Access America on account of services
rendered had no connection with the same. It was followed by
letter dated 18th August, 2004 from the company seeking
permission for opening a current account with ABN AMRO Bank,
Chennai to facilitate the smooth transfer of funds in the minimum
possible time. It was also mentioned that the funds need to be
transferred immediately to the bank. From the said letter it is
apparent that the investors viz. CHPL and KCPL were having an
account with ABN AMRO, Chennai and that the money was to be
transferred from one account to the other in the same branch. The
said letter never indicated that the investor money was to be
received from a foreign party in foreign exchange by the company.
The letter dated 18th August, 2004 only indicated that the
transaction was within India and was obviously in Indian rupees
and there was no indication or mention of any remittance of foreign
exchange by any foreign company. It is clear from the letter that
the investor money was to be deposited with Canara Bank and for
which escrow account was opened by the bank. The bank
accordingly granted permission for opening of the account.
69. No doubt the company has tried to give its own version
and hue to the entire transaction and dubbing the receipt of funds in
the company's account as an error. However, the admitted facts are:
(a) The amount was received in the account of the company
maintained with ABN AMRO Bank.
(b) The amount was received through its subsidiary Data Access
America Inc.
Whether it was a loan given by Odyssey Re, that too with
conditions, is a matter which needs a thorough probe. It is also
possible that as Data Access America has to make substantial
payments to the company, it borrowed the money from the said
parties for making payment to the company.
(c) Although it is alleged that the money was to be given by way of
loan by CHPL/Odyssey with certain conditions, even when this
money was received on 18th August, 2004, the correspondence on
record which is highlighted by the bank shows that much after this
date also there were discussions about the investors infusing Rs.75
crores indicating that such a money has yet to come.
(d) This can be inferred from the shareholder's agreement dated
26 August, 2004, consortium meeting dated 7th September, 2004
th
and follow up letters dated 16th, 17th and 21st September, 2004
received by the bank. Even in reply dated 19th November, 2004
counsel for company M/s Dua Associates did not refute the
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allegation of the bank that money was received from Data Access
America Inc.in the account of the company.
(e) Although as per the representations made, investors were to
infuse Rs.75 crores, money received is US $ 17 million i.e.
Rs.78.45 crores.
(f) After receiving the amount, the ABN AMRO filed inward
remittance certificate with RBI on 19th August, 2004 i.e. the same
date declaring that the remittance was received in the account of
the company against the outstanding bills of services rendered.
(g) No permission of RBI has been obtained by any party for
lending foreign exchange to an Indian company.
70. That apart, allegations of the bank need serious consideration
that pursuant to the orders of this Court, ABN AMRO Bank had
filed its affidavit which clearly shows that after receiving the
amount in accounts of the respondent company, the same were
transferred on different dates in to the account of Cheran Holding
Pvt. Ltd. and on its sister concerns. On the filing of C.A. 36/05 by
CHPL, it became apparent that the present management of the
Company is fraudulently and illegally keeping the amount with its
other companies, which is the security of the Bank and which was
received in the account of the Company from Data Access America
towards payment of its dues. Further serious allegation made by the
bank is that the company has tried to fabricate further
documentation to fill in lacunas in the false story set up in CAs
No.35 & 36/2005 and in order to place the said documents on
record, affidavit was filed in CA No.179/2005.
72. Interim order dated 17th December, 2004 is accordingly
Consequence would be that the amount which has been transferred
from ABN AMRO Account No.1014374 of the company to CHPL
and other companies shall be remitted back by those parties to the
account of the company maintained with ABN AMRO Bank.
Needful in this respect shall be done within two weeks. After
receiving this amount the ABN AMRO Bank shall remit this
amount to Canara bank. It is because of the admitted liability of the
bank and charge of the bank over this money. Furthermore, in case
it is found ultimately that the money is to be refunded to Odyssey
Re etc., appropriate orders can be passed directing Canara Bank to
refund the amount and the bank has sufficient means to carry out
such directions. Appropriate order shall be passed in the company
petition as to how this amount is to be dealt with depending on the
nature of the final orders passed in the company petition."
9. A perusal of the above observations as also on an overall
reading of the order dated 18.11.2005 brings out that subsequent to
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permission having been granted by the Canara Bank, the company (in
liquidation)/DAIL wrongfully and illegally received a sum of Rs.
78.45 Crores (17 million US Dollars) from its foreign subsidy Data
Access America („DAA‟) on 19.08.2004 in an account opened with
ABN AMRO Bank, which was done without informing the bank.
Thereafter, the Ex-Management of the company (in liquidation)
diverted the funds received from its foreign subsidy, to its sister
concern namely, M/s. Cheran Holding Pvt. Ltd. (CHPL), which was
further diverted by the Ex-Management to four other sister concerns,
the relevant details of which are as under:
a. On 19.08.2004 i.e., on the same day, transferred
Rs.35,30,46,482/ to the account of M/s Cheran Enterprises Pvt.
Ltd (CEPL).
b. On 19.08.2004 i.e., again on the same day, transferred
18,05,00,000/- to the account of M/s KCP Associates Holdings
(KCPAH).
c. On 28.10.2004 i.e., again on the same day, transferred Rs.
25,00,000/- to Sporting pastime India Ltd.
d. Out of the amount transferred to KCPAH the management of
the Respondent Company transferred Rs.18.03 Crores to
Syndicate Bank on 20.08.2004.
10. It has been submitted on behalf of Canara Bank that the entire
amount of Rs. 78.45 crores, which was illegally diverted, along with
due interest, has not been repaid. It is pertinent to mention that the
order dated 18.11.2005 was challenged by Cheran Holdings Private
Limited in CO. APPL 3/2006 as also by Sporting Pastime India
Limited in CO. APPL. 5/2006 before the Division Bench of this
Court, which came to be dismissed vide order dated 20.11.2009. It
would not be out of place to mention that several applications were
filed by the parties involved in the present proceedings and the same
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were decided by the then learned Company Judge (as his Lordship of
the Supreme Court was then) vide order dated 21.01.2011, whereby
the following directions were passed:
"36. Keeping in view the aforesaid facts, the following
directions are issued:-
(1) All bank accounts and deposits of CEPL, CHPL, SPIL
and KCPAHPL are hereby attached. No payments will be
made from the said bank accounts except with the
permission of the Company Court. the aforementioned
companies are also restrained from selling, disposing of or
creating third party interest in respect of movable and
immovable assets.
(2) Managing Director/principal officer of CEPL, CHPL,
SPIL and KCPAHPL will file affidavits in the Court
within fifteen days furnishing the following details:
(a) Account numbers and details of the banks
including details of fixed deposits and other deposits.
(b) Details of movable and immovable assets
including shares.
(c) Names and addresses of the directors."
11. It was submitted by the learned Standing Counsel for the
Official Liquidator that the aforesaid directions vide clause (2) have
not been complied with.
12. In the said backdrop, it is also manifest that there has been
diversion of funds from the company (in liquidation) to the tune Rs.
78.45 crores, at the behest of the mastermind Mr. K.C. Palanisamy.
Evidently, the lease/license deed dated 02.06.1999, entered into
between DAIL and M/s. Jasai Exports Pvt. Ltd. was registered. A
perusal of the record also shows that the applicant has not placed on
the record the certified or attested copy of the registered sale deed
dated 14.03.2005, by way of which it is stated to have purchased the
property in question from the original owner. The copy of the License
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Deed whereby the property in question is alleged to have been leased
out to the respondent company (in liquidation) dated 02.06.1999
reserving payment of license fee of Rs. 80,000/- for use and
occupation of the premises with provision for increase etc. has not
been placed by the applicant on the record and the same has been
placed on the record by the respondent/Canara Bank. Evidently, it is
not a registered document either.
13. Further, learned counsel for the respondent/Canara Bank has
pointed out that the name of the applicant company has since been
struck off from the Register of Companies by the Ministry of
Corporate Affairs as per the copy of the Master Data placed on the
record as on 14.12.2023 at 12:05:05 p.m. Although, learned counsel
for the applicant vehemently urged that an application has already
been moved for revival of the company on 01.04.2024, the said fact
was not disclosed while moving the present application. The authority
of Mr. Piyush Kumar, who has filed the application as Authorized
Representative of the Board has not been explained. No resolution of
the Board of Directors has been placed on the record. Apparently, the
sale deed dated 14.03.2005 has been executed after appointment of
Provisional Liquidator by this Court vide order dated 26.10.2024.
14. As pointed out by the learned counsel for Canara Bank, a
perusal of the Master Data from the Ministry of Corporate Affairs as
on 14.12.2023 would show that the registered address of the applicant
company is at Cheran Towers, 6/25, Arts College Road, Coimbatore-
641018, Tamil Nadu, which happens to be the registered address of
the sister concern of the company (in liquidation) viz., Cheran
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Holdings Private Limited. It is also pointed out that no documents
have been placed on the record which would indicate as to how the
amount of sale consideration paid for the property in question was
generated, considering that the paid-up capital of the applicant
company is meagerly Rs. 5,35,000/-. It is also pertinent to mention
that the father of Mr. K.C. Palanisamy has been one of the Directors
of the applicant company and as per the documents placed on the
record, 95.33% of the shareholding of the company is owned by the
wife of the kingpin Mr. K.C. Palanisamy.
15. Before parting with the instant applications, the decision in the
case of Ravindra Ishwardas Sethna v. Official Liquidator2 cited by
the learned Senior Counsel for the applicant to the effect that the
Official Liquidator does not require the premises in question for
beneficial winding up of the company (in liquidation) does not cut any
ice. Likewise, the decision of the Karnataka High Court in the case of
Shri N.R. Ravi v. The Official Liquidator3 as well as the decision of
the Bombay High Court in the case of Eleganza Furnishings Private
Limited v. The OL of Zenith Infotech Limited4, are clearly
distinguishable, wherein it was held that where the premises is
belonging to a third party, which was leased to the company (in
liquidation), then the Official Liquidator would be required to make
payment of rent to such third party land owners as costs of winding
up. Reliance on the decisions in Md. Noorul Hoda v. Bibi
2 (1983) 4 SCC 269
3
Company Application No. 8 of 2015 dated 30.06.2022
4
2015 SCC OnLine Bom 6277
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Raifunnisa5 and Abdul Rahim v. Sk. Abdul Zabar6 to the effect
that the title deed in favour of the applicant company has not been
annulled or declared to be non est by any Court of law in terms of
Article 59 Schedule 1 of the Limitation Act, 1963, do not apply to the
issues that have been raised in the present matter. On the other hand,
though the applicant company is a separate legal entity, having regard
to the manner in which the funds have been siphoned off, as detailed
in the foregoing part of this order, provide compelling reasons to lift
or pierce the corporate veil of the applicant company and look into the
persons who are the real beneficiaries.
16. In view of the aforesaid facts, unhesitatingly, this Court finds
that there are sufficient grounds to raise an inference that the applicant
company is a shell company of the company (in liquidation) and its
mastermind Mr. K.C. Palanisamy. It is manifest that the applicant
company has not come to the Court with clean hands, and therefore,
the reliefs claimed cannot be granted.
17. In view of the foregoing reasons, the present applications
moved by the applicant company, namely SMS Textiles Limited, are
hereby dismissed.
CO.PET. 292/2004
18. Re-notify on 18.07.2024.
DHARMESH SHARMA, J.
JULY 05, 2024
Sadiq
(1996) 7 SCC 767
(2009) 6 SCC 160
