2020 (5) TMI 245 - HC - Companies Law

Maintainability of appeal - Possession of the four flats with Official Liquidator - police protection granted - protection under Section 53A of the Transfer of Property Act - the Ex-Management submits that the present appeal is not maintainable as it is in the nature of a second appeal - HELD 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. 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. 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. 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. 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 - Petition dismissed.

Issues Involved:
1. Exemption Application
2. Delay in Filing the Company Appeal
3. Challenge to the Company Court Order
4. Genuineness of Transactions and Title Claims
5. Validity of Consent Decrees from Bombay High Court
6. Role of Power of Attorney Holder
7. Applicability of Section 53A of the Transfer of Property Act
8. Maintainability of the Appeal
9. SFIO Report and Its Implications

Detailed Analysis:

1. Exemption Application:
Exemption was allowed subject to all just exceptions, and the application was disposed of.

2. Delay in Filing the Company Appeal:
The delay in filing the company appeal was condoned based on the averments made in the application, and the application was disposed of accordingly.

3. Challenge to the Company Court Order:
The appeal challenged the order dated 10th January 2020 by the Company Court, which dismissed the objections to the Thareja Committee Report and directed the Official Liquidator to take possession of the four flats in question. The order allowed the Official Liquidator to seek police protection if necessary.

4. Genuineness of Transactions and Title Claims:
The Thareja Committee found that the claimants failed to produce original documents to prove their titles. The transactions were deemed suspicious due to the payment of the entire consideration in cash, lack of income tax returns showing the purchase, and the absence of affidavits stating the source of funds. The Committee concluded that the documents were manufactured and the claims were bogus. The claimants did not appear in person to support their claims, and the evidence provided by the Power of Attorney Holder was discarded.

5. Validity of Consent Decrees from Bombay High Court:
The consent decrees passed by the Bombay High Court were found to be based on fraudulent acts and were deemed void. The Company Court had already held that these decrees were not binding on the Official Liquidator. The Division Bench did not set aside this conclusion, and the decrees were considered invalid due to the lack of leave from the court as required under Sections 446 and 456 of the Companies Act, 1956.

6. Role of Power of Attorney Holder:
The Power of Attorney Holder could not appear as a witness on behalf of the claimants. The Supreme Court in Janki Vashdeo Bhojwani v. Indusind Bank Ltd. held that a Power of Attorney Holder could not become a witness in the capacity of the party. The Thareja Committee rightly discarded the evidence provided by the Power of Attorney Holder.

7. Applicability of Section 53A of the Transfer of Property Act:
The appellants argued that they were protected under Section 53A of the Transfer of Property Act due to the agreements to sell and the payment of consideration. However, the court found that the appellants failed to prove their ownership and did not step into the witness box, which was necessary to prove readiness and willingness to perform their part of the contract.

8. Maintainability of the Appeal:
The court rejected the preliminary objection regarding the maintainability of the appeal, stating that it was not in the nature of a statutory second appeal. The initial claims were decided by a Committee appointed by a Division Bench, not by the Official Liquidator.

9. SFIO Report and Its Implications:
The SFIO report concluded that the flats were sold unauthorizedly and the proceeds were misappropriated. The court noted that the SFIO report was not final or binding and that the appellants had to prove their titles independently of the report, which they failed to do.

Conclusion:
The appeal was dismissed as the appellants failed to prove their ownership of the flats, did not produce original title documents, and did not step into the witness box. The consent decrees from the Bombay High Court were found to be invalid, and the SFIO report supported the conclusion that the transactions were unauthorized. The pending application was disposed of as infructuous.

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