2024 (8) TMI 27 - HC - Companies Law

Seeking directions against the Official Liquidator to handover vacant possession of the property - Seeking 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 - shell company - 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). HELD THAT - It is 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 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. 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. The decision in the case of RAVINDRA ISHWARDAS SETHNA VERSUS OFFICIAL LIQUIDATOR, HIGH COURT, BOMBAY 1983 (8) TMI 187 - SUPREME COURT 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. 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. The present applications moved by the applicant company, namely SMS Textiles Limited, are hereby dismissed.

Summary

Issues Involved:
1. Request for directions against the Official Liquidator to handover vacant possession of the property.
2. Request for compensation for the period of possession.
3. Legitimacy and maintainability of the application.
4. Allegations of fund diversion by the ex-management of the company in liquidation.
5. Compliance with court orders and legal procedures.

Issue-wise Detailed Analysis:

1. Request for directions against the Official Liquidator to handover vacant possession of the property:
The applicant, SMS Textiles Limited, sought directions under Section 446 of the Companies Act, 1956, for the Official Liquidator to handover vacant possession of a property. The property was purchased from M/s. Jasai Exports Private Limited through a registered Sale Deed dated 14.03.2005. However, the property was occupied by Data Access (India) Ltd. (DAIL), a company in liquidation, under a lease/license deed dated 02.06.1999. The Official Liquidator took possession of the property following the winding-up order against DAIL.

2. Request for compensation for the period of possession:
In CO.APPL. 3176/2016, SMS Textiles Limited also sought compensation of Rs. 5 lacs per month from the date of possession. The Official Liquidator contested this, stating that the averments could not be substantiated without original documents and denied liability for any compensation or rent.

3. Legitimacy and maintainability of the application:
Canara Bank, a secured creditor of DAIL, argued that the application was not maintainable due to lack of supporting documents and the lease/license deed not being registered. The Bank also contended that the applicant lacked locus standi as they were not the original owner of the property and suggested that the applicant should file a civil suit for possession after obtaining court permission under Section 446 of the Companies Act, 1956.

4. Allegations of fund diversion by the ex-management of the company in liquidation:
The court observed significant fund diversion by DAIL's ex-management. The company wrongfully received Rs. 78.45 Crores from its foreign subsidiary, Data Access America, without informing Canara Bank. These funds were diverted to M/s. Cheran Holding Pvt. Ltd. and other sister concerns. The court noted that the applicant company, SMS Textiles Limited, was potentially a shell company linked to the mastermind behind the fund diversion, Mr. K.C. Palanisamy.

5. Compliance with court orders and legal procedures:
The court highlighted non-compliance with its previous orders, including the failure to provide affidavits detailing bank accounts, assets, and directors of the related companies. The court also noted discrepancies in the applicant's documents, including the absence of a certified sale deed and the questionable financial capacity of the applicant company.

Conclusion:
The court found sufficient grounds to infer that SMS Textiles Limited was a shell company associated with the company in liquidation and its mastermind. The applicant did not come to the court with clean hands, and thus, the reliefs claimed were denied. The applications moved by SMS Textiles Limited were dismissed. The court set a subsequent hearing date for the ongoing winding-up proceedings.