2020 (8) TMI 162 - HC - Companies Law

Purchase of property - Issuance of direction or order to the effect to set aside or not to accept the recommendation made by the learned Mr. G.P. Thareja - the Presiding Officer of the One Man Committee constituted by this Hon ble Court in its XIIIth Report dated 05.02.2007 - completion of process of registration/execution of the Sale Deeds of the land - providing of all necessary documents - violation of principles of natural justice - HELD THAT - Both the reports, namely, the Thareja Committee Report and the SFIO Report have rejected the claim of the applicant. It is not in dispute that the agreement to sell and power of attorneys were executed. The Thareja Committee report however concludes that material evidence has not been produced and that the transaction is not genuine and bona fide. The report gravely doubts that any consideration was paid. SFIO in its report concludes that the resolution authorising Sh. V.K. Sharma to make the agreement to sell and GPA on behalf of the five stated companies of the JVG Group are fabricated. The conclusion is unequivocal that Sh. V.K. Sharma had no authority to execute the said documents and to receive any consideration for and on behalf of the said companies in cash. The report unequivocally concludes that Sh. V.K. Sharma has indulged in fraudulent conduct and has siphoned off the company s money. Based on these two reports, it is quite clear that the transaction which is claimed by the applicant company cannot be accepted. Regarding the objections taken to the Thareja Committee report by the applicant, the objections are misplaced. There is no dispute that the agreement to sell and power of attorney were duly executed and registered. The issue is as to whether the consideration was actually paid given the fact that it is claimed to have been paid in cash. The Thareja Committee report concludes that the relevant documents, namely, the cash book, ledger, etc. have not been placed on record and concludes that the transaction lacks bona fide. This conclusion is supported by so many other surrounding facts and circumstances which render the objections raised by the applicant to the Thareja Committee Report completely irrelevant and without merits. The transaction as alleged by the applicant is not a bona fide act. The conclusions of the Thareja Committee is concurred with - Further, in 2002 when the alleged transaction took place, the JVG Group of Companies was a sinking ship. The flagship company of the Group, namely, JVG Finance Ltd. had already been ordered to be provisionally wound up by order dated 05.06.1998. One cannot help coming to the conclusion that this transaction was carried out only to whisk away valuable assets of the JVG Group of Companies which at that time were likely to go under winding up proceedings. Application dismissed.

Issues Involved:
1. Validity of the Thareja Committee's findings and recommendations.
2. Legitimacy of the sale transactions conducted by the applicant with JVG Group companies.
3. Compliance with principles of natural justice by the Thareja Committee.
4. Examination of the SFIO report regarding the transactions.
5. Authority of V.K. Sharma to execute agreements on behalf of JVG Group companies.
6. Bona fides of the transactions claimed by the applicant.

Detailed Analysis:

1. Validity of the Thareja Committee's Findings and Recommendations:
The Thareja Committee's VIIIth Report dated 16.01.2006 concluded that the land purchased in Gurgaon in the name of various JVG companies was funded by JVG Finance Ltd. (under liquidation). It rejected the claim of Tirupati Cylinders Ltd. (the applicant) and recommended that the Official Liquidator should take control of the lands at Gurgaon. The XIIIth Report dated 07.02.2007 reiterated that the land transactions were not bona fide, noting discrepancies such as the land being sold at a fraction of its purchase price and identical receipt numbers for different transactions.

2. Legitimacy of the Sale Transactions Conducted by the Applicant:
The applicant claimed to have purchased land from JVG Group companies between May and July 2002, with all documents registered and consideration paid in cash. The Thareja Committee found that the transactions were fraudulent, noting the land was sold at significantly undervalued prices and that the original title documents were not handed over to the applicant. The SFIO report corroborated that the transactions were fraudulent, with V.K. Sharma siphoning off funds from JVG Finance Ltd.

3. Compliance with Principles of Natural Justice by the Thareja Committee:
The applicant argued that the Thareja Committee violated principles of natural justice by not providing copies of exhibits (Ex. X-1 to X-27) and not allowing cross-examination of witnesses like Sushil Kumar Gupta. The court found these objections misplaced, emphasizing that the applicant did not produce crucial documents like cash books and ledgers, which supported the Committee's conclusion of the transaction's lack of bona fides.

4. Examination of the SFIO Report:
The SFIO report detailed the fraudulent nature of the transactions, noting that V.K. Sharma fabricated documents and misused company funds. It concluded that the resolutions authorizing V.K. Sharma to sell land were fabricated and that he siphoned off funds from JVG Finance Ltd. This supported the Thareja Committee's findings and further discredited the applicant's claims.

5. Authority of V.K. Sharma to Execute Agreements:
The court found that V.K. Sharma had no authority to execute the agreements on behalf of the JVG Group companies. The SFIO report confirmed that the resolutions authorizing him were fabricated. The court emphasized that V.K. Sharma's actions were fraudulent and aimed at siphoning off company funds, making the transactions invalid.

6. Bona Fides of the Transactions Claimed by the Applicant:
The court noted several factors casting doubt on the bona fides of the transactions, including the lack of demarcation of the land, absence of original title documents, and the entire consideration being paid in cash. The applicant's failure to produce income tax records and balance sheets further weakened their claim. The court drew adverse inferences from the applicant's conduct and lack of evidence, concluding that the transactions were not genuine.

Conclusion:
The court dismissed the application, upholding the Thareja Committee's and SFIO's findings that the transactions were fraudulent, and that V.K. Sharma had no authority to execute the agreements. The court emphasized the lack of bona fides in the applicant's claims and the failure to produce crucial evidence, leading to the conclusion that the transactions were aimed at defrauding creditors and siphoning off funds from JVG Finance Ltd.

← Previous Next →