9911796707
TMI Blog2002 (4) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... d in C.P. No. 235 of 1999 by the same applicant for the identical relief. Application No. 2050 of 2000 has been filed in C.P. No. 236 of 1999 by the same applicant for the identical relief. Application No. 2051 of 2000 has been filed in C.P. No. 237 of 1999 by the same applicant for the identical relief. Application No. 2052 of 2000 has been filed in C.P. No. 238 of 1999 by the same applicant for the identical relief. 3. Identical but separate applications for the same relief have been taken out by the same applicant in those C.Ps. namely, C.P. Nos. 233 to 238 of 1999. In other respects there is no difference. It would be sufficient to refer to the facts in one of the applications. These company petitions are pending and pending the company petitions, the provisional liquidator has been appointed by this court. That apart, this court also appointed an administrator. 4. According to the applicant, during the end of March 1999, R.P.S. Benefit Fund Ltd., hereinafter referred to as RPSB to sell the property bearing Door No. 23, G.N. Chetty Road, T. Nagar, admeasuring 9315 square feet comprised in T.S. Nos. 4890 and 4891, bounded on the north by G.N. Chetty Road, bounded o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted a "no objection certificate" for the transfer of the property in question for a consideration of Rs. 1,65,00,000 in favour of the applicant. The applicant called upon the Bank of Madura to confirm the actual amount outstanding as on date and also requested the said bank to confirm that on discharge of the full liability, the original document should be handed over to the applicant. The said Bank of Madura by reply dated July 24, 1999, replied that a sum of Rs. 67,97,895 is due and Rs. 3,930 is the amount of interest per day commencing from July 25, 1999. 7. It is claimed that the RPSB, confirmed by its letter dated July 31, 1999, that Rs. 92 lakhs out of sale consideration received had been disbursed to various depositors of the company. The said company also applied for income-tax certificate under section 230A of the Income-tax Act, 1961. A clearance certificate had also been issued on August 3, 1999, for the sale. The said company executed a sale deed in favour of the applicant and the same has been registered as document No. 1673 of 1999 on May 19, 1999, in the office of the Sub-Registrar, T. Nagar. In addition to the amount already referred payment the applicant paid R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akhs and that the bank is interested in recovering the amount advanced by it with interest. 10. Heard Mr. V.S. Subramanian, learned counsel appearing for the applicant in all the company applications Mrs. Nalini Chidambaram, learned senior counsel, appearing for RPSB Mr. Chinnasamy, learned counsel for the administrator, Ms. Latha Parimalavadhana for the official liquidator and Mr. P.L. Narayanan, learned counsel appearing for Bank of Madura. 11. Mr. V.S. Subramanian, learned counsel appearing for the applicant in all the company applications mainly contended that the purchase by the applicant is a bona fide transaction and for valid consideration, besides the consideration paid reflects the prevailing market price and therefore this court has to come to the rescue of the applicant by allowing the applications. According to learned counsel for the applicant the transaction being bona fide and there being no application by the liquidator or by the administrator, the applications as taken out deserve to be allowed. 12. It is further contended that the transaction in question has not been entered with a view to defraud the depositors or creditors of RPSB and no applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a view to defeat all the depositors and creditors. Mr. Chinnasamy also pointed out as to how the applicant came to know about the proposed sale by the said RPSB. There has been no publication of the intended sale of the property by RPSB at any point of time, as to who arranged for the negotiations also is not known. The inherent and patent materials disclosing the factum of handing over possession, extent of the property, value of the property, location of the property and the conduct of the applicant as well as the management of RPSB would show that the transaction is not a bona fide transaction, but it has been entered into with a view to defeat the creditors and to siphon off substantial amount at the cost of depositors and creditors. Definitely the transaction is not a bona fide transaction, nor could it be stated that the board of directors and managing director have acted bona fide , in the interest of the company and its depositors, but they have with designs schemed and siphoned off the funds. 17. It is further pointed out that having purchased the property on April 8, 1995, for a consideration of Rs. 163 lakhs, having paid a stamp duty of the value of Rs. 22,82, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it is clear that the property had been sold for a very low price as apparent consideration against the market value that prevailed on that date and substantial amount had been siphoned off by the directors of RPSB and therefore it is not a bona fide transaction entered into in the course of administration of RPSB and the applications deserve to be dismissed. 20. It is pointed by counsel that there is time enough for the official liquidator or the administrator to take out appropriate application under section 536 or 531A of the Companies Act and it is also pointed out that even long prior to the very agreement itself there had been heavy pressure on the RPSB by its depositors and creditors as already recorded by this court in the earlier orders and therefore it is not a bona fide sale and it is a sale effected with a view to siphon off substantial sum which is far below the market price which is just 40 per cent of the prevailing market value and the transaction cannot be accepted or treated or held as a bona fide transaction, but on the other hand such transaction has been undertaken for ulterior purpose, for personal gains and to deny and deprive the valuable assets o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the applicant from RPSB are valid and binding and they are not liable to be challenged in the winding up proceedings? ( b )Whether the property in question has been sold bona fide , in good faith and in the interest of the company? ( c )Whether the property has been sold for a fair market price? If not, whether it will reflect on the transaction as not bona fide ? And whether there is any siphoning off of the funds in the transaction by the directors by selling it far below the market value? ( d )Whether the sale has been effected with the intent to defeat the claims of the depositors and other creditors of the company and to benefit the applicant as well as the persons who were in the management of RPSB? ( e )Whether the applicants are entitled to an order as prayed for in all the applications? ( f )Whether the sale transaction entered by the applicant is bona fide and valid and binding? ( g )To what relief, if any? 25. Before referring to the facts of the present applications, it is essential to find out whether there has been any pressure on the company by the depositors namely the creditors before the sale transaction and whether RPSB was in a positio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1999, would show that the chairman and directors in management would disclose prima facie fraud of massive proportions having been committed by the president of the company P.G. Saranyan apparently with the co-operation and approval of other members of the board of directors. This court further held thus : "2. The enormity of the fraud is evident from a bare mention of the nature of the activity and the huge amounts which apparently have been siphoned off from a mutual benefit society, which enjoys many exemptions under the Companies Act, which exemptions have been granted in order to encourage thrift and mutual help, and which exemptions were intended to lesser the burden on people who save small amounts and who help each other through a mutual benefit society. That device of mutual benefit society, also known as Nidhis , has been abused perhaps to the severest possible extent in this company R.P.S. Benefit Fund Ltd. has turned out to be a benefit fund solely for the benefit of Saranyan, his family, his friends and his associates. The benefit fund device was not meant to confer a benefit to one individual or family at the expense of thousands of trusting individuals who had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1995." 28. It is clear from the earlier orders as well as the report of the auditors and the very statement of P.G. Saranyan, the then president who has been controlling the entire affairs of RPSB, that even much prior to the sale agreement dated April 22, 1999, the company s liquidity position was very poor, there has been heavy pressure by the depositors on the company since the company had even failed to repay the matured deposits. Therefore, at the material point of time the company was under heavy pressure from its depositors and the company had been conducting its affairs not in the interest of the company or its depositors, but had been treating the assets of the company as if it is a private property of P.G. Saranyan and his family members and a large scale fraud had been committed as has been held by R. Jayasimha Babu, J. in various earlier orders. 29. It is also suggested that RPSB had set up the petitioners to file the winding up petitions to avoid the complaints being made by the depositors and such criminal complaints were in abundance. 30. Taking up the next aspect as to whether the property had been sold for a fair market value, it is rightly pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing over possession being extraordinary does not deserve to be accepted and it is false. On May 30, 1999, RPSB had given a confirmation letter to the applicant which reads thus : ". . . We confirm that a sum of Rs. 82,50,000 (rupees eighty-two lakhs and fifty thousand only) plus an additional amount of Rs. 1,50,000 (rupees one lakh fifty thousand only) was so far been received from your goodselves towards purchase of the property and the same has been used for disbursing to various depositors of our company." 33. The application filed before the appropriate authority on May 6, 1999, had been returned on June 4, 1999, and revised Form 37-I was filed. On July 13, 1999, no objection certificate has been issued by the appropriate authority. RPSB applied to the Income-tax Officer for certificate under sub-section (1) of section 230A. Even here also the cost of acquisition including stamp duty has been set out as Rs. 1,86,29,485; developmental expenses of Rs. 3,91,488 and interest capitalised at Rs. 1,28,36,956 aggregating to Rs. 3,18,57,889 has been concealed and the certificate under section 230A had been managed on August 3, 1999. 34. The sale deed was executed on August 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ket value. It cannot be stated that the prices of land had gone down, much less so steeply. The property is close to Anna Salai and it is a stone s throw away distance, it is in the junction of G.N. Chetty and Boag Road, a corner and rectangular plot and it is a corner plot also as seen from the fact that RPSB had spent Rs. 3,91,488 towards securing an approval of the building plan for putting up 1+4 stories. Yet such a valuable property had been sold for less than one half of the prevailing market rate. The suggestion that the purchase price has been boosted to show increase in the assets held by the company, but this has to be rejected in the light of the banker expert valuation arrived at before advancing a loan. 38. It is pointed out by Mr. V.S. Subramanian learned counsel for the petitioner that this Court directed the banker to invite offers, but no offers have been received. Be that so, it will not mean that there is a reduction in the market price, nor could it be inferred that the market value of the property was only Rs. 165 lakhs. On June 8, 1995, the property had been purchased for Rs. 163 lakhs. The banker, namely, Bank of Madura has assessed the market value of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qually well settled that if the transaction was entered into as a result of lawful pressure of a bona fide creditor to recover his dues the transaction or transfer could not be treated as a fraudulent preference. Merely because it was entered into within a period of six months prior to the commence- ment of winding up, but if the transaction was entered into as a result of a design by directors to give preference to certain creditors and to siphon off the funds, definitely the Court is not helpless. The test would be whether the company entered into such transaction to save its own skin for its own benefit in the circumstances then prevailing or whether the dominant motive of the company is to favour one creditor over another. This is not a case where the transferee could contend that he is not aware of the infirmity in the resolution or designs or motive behind the transaction. With full knowledge of what is going on in the company the transferee entered into the transaction with designs with the active assistance of the persons in the management of the company. 41. If the intention with which agreement is concluded, a transaction is entered to conceal a fraudulent or dishon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65. Any director conscious of his managerial responsibility, who had cared to examine the affairs of the bank, could not have failed to find out what was really happening in the bank. The fact that these practices were tolerated for such a long period without any check by the board of directors indicates that the promoter directors must be participants in the benefits of widespread misappropriation even though they may have so operated as not to leave any traces of actual misappropriation by them in the records of the bank. . . . (p. 1123) . . . The promoter or founder directors who were there since the inception of the bank, were cognizant of the nature of the dealings by the managing director and the officers of the bank. The evidence showed that they had been discussing matters relating to the management of the company at the meetings of the board where item policy which benefited the directors at the expense of the depositors, must have been discussed. They could not have been ignorant of the fact that the account books contained fictitious entries showing payments for shares by them when they had not actually paid for them. Nor could they be so innocent as not to know of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany on April 22, 1999, to sell the property in question and on the very same day the agreement was entered into. Peculiarly there was no negotiation at all, nor was there an effort to find out the best purchaser or search for any other purchaser. The agreement was entered on April 22, 1999, and the company petition was presented on July 26, 1999. 45. According to the official liquidator the agreement entered into between the company and the applicant is a fraudulent preference and the sale is void in law. The liquidator relies upon section 531A of the Companies Act. The request of the applicant to treat the sale executed by the company as valid does not deserve any further consideration and it deserves to be dismissed. The contention that the plot was odd-sized or that sufficient space has to be left for purpose of promotion of construction cannot be countenanced. The location of the plot which is in the heart of the town should not be lost sight of. The very fact that without any demur substantial sum has been paid by the applicant without protest towards additional stamp duty would not only show the market value, but also the transaction has been entered into far less than ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
