2013 (5) TMI 710 - HC - Companies Law

Winding up petition - By Resolution dated 23rd May 1963 Lokmanya Cooperative Housing Society ( LCHS ) which owned lands at Versova in Bombay decided to sell a parcel thereof to Mr. R.P. Anand looking after branch office at Mumbai of Anand Finance Private Limited ( AFPL ) and 16 other joint purchasers - whether the land was purchased benami but who was the real owner of the property? - winding up petition as AFPL owes more than Rs. 1.70 crores to its creditors and was incapable of meeting its liabilities - Held that - An analysis of the evidence renders the version of Mr. R.P. Anand that the Versova land was purchased by him in his own name by borrowing the funds in part from AFPL more probable. On the other hand, the OL has been unable to produce credible evidence in support of the plea that the Versova land had in fact been purchased by Mr. R.P. Anand as a benami for AFPL or that the Board of Directors of AFPL had resolved the land in Versova should be purchased by AFPL in the name of Mr. R.P. Anand. The declaration alleged to have been given by Mr. R.P. Anand was not produced and was unable to be proved. The minutes book produced before the Court showed that the crucial part of the minutes 30th April 1966 was admittedly written by Mr. R.L. Anand in his hand writing later on and not counter-signed by the Chairman of the meeting. Consequently, this Court rejects the case forthwith by the OL that the land at Versova actually belongs to AFPL. The Court rejects the plea forthwith by the OL that the land ad measuring 38681 sq. yards at Versova at Rs. 7.60 per sq. yd under a sale deed dated 17th September 1964 which has remained in possession of Mr. R.P. Anand in fact belongs to AFPL. What is the amount that should be directed to be paid by Mr. R.P. Anand to AFPL, treating the money advanced to him by AFPL as a loan that has remained unpaid till date? - Held that - The factors that weigh with the Court are in the first place with the land not belonging to AFPL but to Mr. R.P. Anand, at the highest the sum advanced to him by AFPL for its purchase can be treated as an unpaid loan. There was no agreement at any point in time that he would pay AFPL compound interest of the sum. On the other hand as a result of pendency of the present petition for over 47 years, Mr. R.P. Anand has effectively been deprived of the right of dealing with the property. The extent available is about 7,000sq.yds and not 11,700 sq.yds as contended by the OL. At one stage of proceedings Mr. R.P. Anand himself offered to pay a sum of Rs. 50 lakhs and this fact was noticed in the order by the Court in its order dated 6th May 2002. However, even before the said offer could be acted upon, a higher offer was made. In light of the above factors the Court considers it appropriate to direct Mr. R.P. Anand to pay to the OL in the account of AFPL a sum of Rs. 65 lakhs by 15th July 2013 in full discharge of all of his liabilities towards AFPL and all interim orders operating against him as well as the property in question will stand vacated. Mr. R.P. Anand will be free to deal with his portion of the Versova property. With the payment of Rs. 65 lakhs by R.P. Anand, the final curtain would be drawn on this beleaguered litigation that has persisted for well over four decades. Upon such payment being made, nothing would remain to be examined as there are no claims to be settled, no assets to be realised and none of the contributories other than Mr. R.P. Anand surviving. Thus in exercise of its powers under Section 481 of the Act, the Court directs that upon payment of Rs. 65 lakhs by Mr. R.P. Anand, the OL will transfer a sum of Rs. 10 lakhs to the Common Pool Fund of the OL to defray the expenses incurred over the years in this matter by the OL and after settling any other statutory dues transfer the balance sum to the Reserve Bank of India within thirty days thereafter. With that event happening, AFPL will stand dissolved and its name will be struck off from the register of companies. Within thirty days of the transfer of the sum as directed to the RBI, the OL will file a certified copy of this order with the Registrar of Companies for compliance.

Summary

Issues Involved:
1. Winding up of Anand Finance Private Limited (AFPL).
2. Ownership of the Versova land.
3. Appointment of a Provisional Liquidator.
4. Scheme of Arrangement.
5. Alleged misuse of company assets by directors.
6. Determination of the loan amount advanced by AFPL to Mr. R.P. Anand.

Detailed Analysis:

1. Winding up of Anand Finance Private Limited (AFPL):
The winding-up petition for AFPL was filed in 1966 by H.H. Nawab Mirza Hussain Yawar Khan, citing the company's inability to meet its liabilities amounting to over Rs. 1.70 crores. The court appointed a Provisional Liquidator and issued detailed directions for the management of the company. Subsequently, a Scheme of Arrangement was sanctioned in 1968, but the company continued to face financial difficulties.

2. Ownership of the Versova land:
The key issue was whether the Versova land, purchased by Mr. R.P. Anand, was acquired with AFPL's funds and thus belonged to AFPL. The court examined various pieces of evidence, including the minutes of the Board meeting held on 30th April 1966, which were found to be tampered with. Mr. R.L. Anand admitted to altering the minutes post facto. The court concluded that the evidence did not support the claim that the Versova land was purchased by Mr. R.P. Anand as a benami for AFPL. Consequently, the court rejected the OL's plea that the land belonged to AFPL.

3. Appointment of a Provisional Liquidator:
In May 1966, a Provisional Liquidator was appointed to oversee the affairs of AFPL. The court directed the Provisional Liquidator to take charge of the company's records and assets. This appointment was part of the broader effort to manage the company's financial distress and ensure proper administration.

4. Scheme of Arrangement:
A Scheme of Arrangement was filed by the Managing Committee of AFPL in May 1966 and sanctioned in July 1968. The scheme aimed to pay unsecured depositors 65% in cash from the sale of assets and 35% in shares. However, the scheme could not be fully implemented, leading to further legal proceedings.

5. Alleged misuse of company assets by directors:
The petition alleged that the directors of AFPL misused the company's income from cinemas in Bombay and Delhi for personal benefit, despite an undertaking not to transfer the company's immovable properties, shares, and securities. The court appointed a committee to take over the management of AFPL and directed the current directors to hand over all assets and books to the committee.

6. Determination of the loan amount advanced by AFPL to Mr. R.P. Anand:
The court considered the amount advanced by AFPL to Mr. R.P. Anand for purchasing the Versova land as a loan. Various calculations of interest on the loan amount were presented. The court directed Mr. R.P. Anand to pay Rs. 65 lakhs to AFPL by 15th July 2013, treating it as full discharge of his liabilities. This amount was determined considering the long pendency of the case and the deprivation faced by Mr. R.P. Anand in dealing with the property.

Conclusion:
The court concluded that the Versova land did not belong to AFPL and directed Mr. R.P. Anand to pay Rs. 65 lakhs to AFPL. Upon payment, all interim orders against Mr. R.P. Anand would be vacated, and he would be free to deal with the property. The court also directed that AFPL would be dissolved, and its name struck off from the register of companies upon the completion of the payment and other formalities. All related applications and petitions were disposed of accordingly.