2019 (10) TMI 895 - HC - Companies Law

Winding up of the respondent Company - appointment of Official Liquidator - Sections 541 and 542 of the Companies Act, 1956 - HELD THAT - The applicant company has been unable to explain the source of funds for acquisition of the land. The applicant has not been able to show bank statements, the statement of accounts, Bank Instruments etc. Despite several opportunities the records which would normally be in the power and possession of the applicants have been deliberately hidden from the court. This clearly raises a strong suspicion about the acts and conduct of the applicants. In the present case, despite directions of this court dated 5.9.2008 and subsequently, the applicants have failed to produce relevant documents to show the details. Clearly, this court would draw an adverse inference against the applicants for having withheld from the court the most relevant documents/important documents to show that it is not a part of the Hoffland Group and the funds for purchase of the land in question were not of the Hoffland Group but of the applicant company. The plea of the applicants lacks bona fide. The best evidence was available with the applicants which they have chosen not to place on record. Only as a mechanism and ploy to delay the proceedings this desperate plea is being taken that this court may frame issues and record evidence - petition dismissed.

Issues Involved:
1. Whether Goga Foods Limited is part of the Hoffland Group of Companies.
2. Whether the assets of Goga Foods Limited were bought using funds from Hoffland Finance Limited.
3. Whether the applicant (Goga Foods Limited) should be allowed to lead evidence and frame issues.
4. Applicability of the Benami Transactions (Prohibition) Act, 1988.

Detailed Analysis:

1. Whether Goga Foods Limited is part of the Hoffland Group of Companies:
The court examined the relationship between Goga Foods Limited and Hoffland Group of Companies. It was noted that Mr. B.B. Sharma, the promoter of Hoffland Finance Limited, was initially involved with Goga Foods Limited. Despite his resignation in 1995, the court found substantial evidence indicating that the operations and assets of Goga Foods Limited were intertwined with those of Hoffland Group. The court-appointed committee and the Official Liquidator (OL) provided evidence that the properties in question were purchased using funds from Hoffland Finance Limited, and the land owned by Goga Foods Limited and Hoffland Engineers Limited was contiguous and interspersed, indicating common ownership.

2. Whether the assets of Goga Foods Limited were bought using funds from Hoffland Finance Limited:
The court reviewed the financial records and statements provided by the applicants. The balance sheets of Goga Foods Limited for the years 1991-1995 showed minimal profits and no substantial business activity, making it improbable that Goga Foods Limited had the financial capability to purchase the land independently. Moreover, the court considered statements from Mr. B.B. Sharma, who admitted that the funds for purchasing the land came from Hoffland Finance Limited. The Economic Offences Wing also confirmed that funds were transferred to Goga Foods Limited for this purpose. The court concluded that the assets of Goga Foods Limited were indeed bought using funds from Hoffland Finance Limited.

3. Whether the applicant (Goga Foods Limited) should be allowed to lead evidence and frame issues:
The court rejected the applicant's plea to lead evidence and frame issues. It was noted that the applicant had failed to provide necessary documents and details despite multiple court orders. The court emphasized that the best evidence was in the possession of the applicants, and their failure to produce it raised strong suspicions about their conduct. The court had previously rejected an affidavit filed by the applicant for lacking relevant documents and deemed it a ploy to delay proceedings. The court concluded that there was no merit in the applicant's request to lead evidence.

4. Applicability of the Benami Transactions (Prohibition) Act, 1988:
The applicant argued that if the court accepted the OL's contentions, the land in question would fall under the Benami Transactions (Prohibition) Act, 1988. However, the court found this argument unconvincing and noted that the nature of the transactions did not attract the provisions of the Benami Transactions (Prohibition) Act, 1988.

Conclusion:
The court dismissed the applications filed by Goga Foods Limited, concluding that the company was part of the Hoffland Group of Companies and that its assets were purchased using funds from Hoffland Finance Limited. The court also denied the applicant's request to lead evidence and frame issues, citing a lack of bona fide and deliberate withholding of relevant documents. The OL was granted the freedom to take steps regarding the property as per law.

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