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TMI Blog2004 (7) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial Services Ltd. be wound up by and under the provisions of section 45A of the Reserve Bank of India Act. This Court on October 20, 2000, admitted the said petition and appointed the Official Liquidator as provisional liquidator of Piramal Financial Services Ltd. [since reported in the case of Reserve Bank of India v. Piramal Financial Services Ltd. [2000] 41 (4) GLR 3476]. 3. This court by its order dated March 20, 2001, directed that Piramal Financial Services Ltd. be wound up and the Official Liquidator, who was appointed as provisional liquidator by order dated October 20, 2000, was appointed as liquidator of the company with usual powers under the provisions of the Companies Act, 1956. This Court by its order dated July 20, 2001, passed in Company Application No. 44 of 2000 directed the Official Liquidator to take possession of the properties and assets as mentioned in Schedule A of the report of the Official Liquidator dated July 12, 2001, in the aforesaid Company Application No. 44 of 2001. 4. It has been stated that several creditors had also filed winding up petitions against Piramal Financial Services Ltd. under the provisions of the Companies Act, 1956, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of his statement that he is the owner of the premises. On a perusal of the said letter of allotment and certificate of possession, it was ascertained that letter of allotment was issued on February 24, 2000, and possession was given on April 10, 2000. The said letter of allotment dated February 24, 2000, and the receipts are produced at pages 20 to 28 as Annexure I of the paper book. Certificate of possession is produced at Annexure V at page 31 of the paper book. It appears that thus Radhe Associates and Mr. Ashish Patel, contrary to the letter of allotment dated April 10, 1997, and certificate of possession dated April 10, 1997, allotted shop No. 103 to Shri Manharlal Shivlal Shah, Nikhil Manharlal Shah and Minesh Manharlal Shah. 5.2 Learned counsel submitted that once a letter of allotment is issued in favour of Piramal Financial Services Ltd. on payment of full consideration by Piramal Financial Services Ltd. and Radhe Associates receiving full consideration and in part performance of the contract possession is also handed over to Piramal Financial Services Ltd., it was not open for Radhe Associates to allot the said shop No. 103 to Shri Manharlal Shivlal Shah, Nik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies, who are promoters and/or controlled by Mr. Ashish Patel, his friends, relatives and associates. In view of the aforesaid facts, the liquidator submitted Official Liquidator s report No. 56 of 2003 praying that the liquidator be authorised to take possession of shop No. 103 from Dinesh P. Shah. In the said Official Liquidator s report, Shri Nikhil M. Shah has been joined as respondent No. 8, Shri D.P. Shah as respondent No. 9 and Radhe Associates as respondent No. 10 and Shri Ashish Patel as respondent No. 11. 8. Respondent Nos. 1 to 8 though served, chose not to appear. Shri Dinesh P. Shah-respondent No. 9 entered appearance through Ms. K.J. Brahmbhatt and Shri Y.N. Ravani, learned advocate appeared for respondent Nos. 10 and 11. Thereafter, Nanavati Associates entered appearance for respondent Nos. 10 and 11. Earlier an affidavit-in-reply was filed on October 11, 2003, by Shri Ashish Patel-respondent No. 11 herein. The said affidavit-in-reply has been produced at page 50 of the paper book. Thereafter additional affidavit dated December 1, 2003, was filed by Mr. Ashish Patel, which is produced at page 91. Respondent No. 9 filed an affidavit dated October 13, 2003, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ramal Financial Services Ltd. their say is that letter of allotment does not confer any title and the liquidator has not produced any other document and when it comes to respondent No. 9 the letter of allotment creates title. The said contention reveals the attitude of respondent Nos. 9, 10 and 11. Respondent Nos. 9, 10 and 11 have double standards. 11. Respondent No. 9 had filed further affidavit which is produced at page 77 of the paper book. In para 2 at page 78 of the paper book, it is contended that the said allotment letter and possession certificate do not create any propriety right, title or interest on the said shop in favour of the liquidator. It is also contended that under the so-called possession certificate, Piramal Financial Services Ltd. was never put in actual physical possession of the said shop as mentioned in the affidavit of respondent No. 9. The liquidator contended that respondent No. 9, who is not a party to the transaction, how he can make such submission and raise such contention. What is the basis of the argument that Piramal Financial Services Ltd. was not in possession when certificate of possession dated April 10, 1997, issued by Radhe Associates c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under any circumstances. Nowhere it is stated and even in the argument either respondent No. 9 or respondent No. 10 or respondent No. 11 has not produced any document to show that the amount has been in fact paid to Piramal Financial Services Ltd. 13. It is submitted that by taking over the liability of a debtor by another party it cannot be said that the amount is paid to the creditor and the security stands released. The contention in that behalf is baseless and made with ulterior motive. 14. Respondent No. 11-Mr. Ashish Patel has filed additional affidavit dated October 11, 2003, on page 50 and he has also filed further affidavit dated December 1, 2003, on page 91 dealing with Shop No. 103 at Ganesh Plaza. In the said affidavit, respondent No. 11-Shri Ashish Patel has not denied the issuance of allotment letter dated April 10, 1997, and certificate of possession also dated April 10, 1997. In the said affidavits, it is contended that Radhe Estate Developers, a partnership firm, took a loan from Piramal Financial Services Ltd. on June 14, 1996. On July 9, 1997, an agreement was entered into between Piramal Financial Services Ltd. and Radhe Estate Developers. By the said ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the ownership is created in favour of Piramal Financial Services Ltd. on April 10, 1997, how any third party, who has no right, title or interest in the said property, can create security and that too in favour of the person, who is the owner of the property. It may be stated here that everything has been done at the behest of Mr. Ashish Patel, who is concerned with all the parties, namely, Piramal Financial Services Ltd., Radhe Associates and Radhe Estate Developers. It is submitted that the agreement is not a valid agreement and does not create any security and is having no effect and it did not create any security, as is alleged by Mr. Ashish Patel. 18. It is a well-settled principle of law that security can be created by way of mortgage. In the present case, no document or any other paper is produced to show that the mortgage has been created. It is also not stated what title deeds were deposited with Piramal Financial Services Ltd. when security was created. In view of the same, it is submitted that the agreement dated July 9, 1997, should not be believed and should be rejected. 19. In the additional affidavit it is stated that by an agreement and/or MoU dated Sept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, Opp. Navrangpura Bus Stop, Ahmedabad. They are carrying on cloth business. During the year 1999-2000, their business expanded and they started facing shortage of space and, therefore, with a view to purchase another shop they first approached Ashish Patel of Radhe Group who has developed the Ganesh Plaza building and inquired for any shop being available on sale or resale basis. They were informed that as such all shops are sold away but the allottee of Shop No. A/103 wants to cancel his allotment and if interested he may do the needful. As the said shop was in the same building and situated just above the existing shops, respondent No. 9 and his son immediately showed their willingness to purchase it. 23. It is contended that thereafter somewhere in February, 2000, Radhe Associates informed respondent No. 9 that the erstwhile allottees have agreed for cancelling their allotment and called upon them to make initial payment towards the said shop. 23.1 Thereafter, on February 24, 2000, respondent No. 9 gave a cheque for Rs. 2,50,000 towards the booking charges of Shop No. A/103 to Radhe Associates. Radhe Associates issued a receipt for Rs. 2,50,000 and also an allotment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexure IV/1 and IV/2 at pages 29 to 30. 25.2 Thereafter respondent No. 9 has made full payment of Rs. 15,84,200 on April 20, 2000, to Radhe Associates which gave vacant and peaceful possession of the said shop to respondent No. 9 and his son and also issued certificate to that effect. It is annexed as Annexure V at page 31. 25.3 Thereafter on August 9, 2001, the representatives of the liquidator visited the said shop and showed order dated July 20, 2001, passed by this Court and asked respondent No. 9 and his son to give possession of the same. Respondent No. 9 and his son informed them that the said shop is purchased on making full payment of Rs. 15,84,200 from Radhe Associates; that Piramal has nothing to do with the said shop, etc. At that time respondent No. 9 and his son also called Shri Ashish Patel, the partner of Radhe Associates, the developers of Himalayanagar Co-operative Housing Society Ltd. who informed the representative of the Official Liquidator that no loan was taken from Piramal on the said shop. Respondent No. 9 also pointed out certain papers/documents which established that Piramal had no claim over the said shop. Respondent No. 9 has handed over the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s would serve as a notice of title in favour of the person who is in possession. In the present case as Piramal was not in actual physical possession at any point of time there was no question of notice to the world at large about the so-called allotment in favour of Piramal. Moreover, the said documents at pages 5 and 6 are not registered one. Moreover, the said allotment letter dated April 10, 1997, does not mention any consideration. It only states that full consideration is received. It is vague. Thus, by merely producing the said allotment letter dated April 10, 1997 and certificate dated April 10, 1997, the Official Liquidator has failed to establish any linkage between the said shop and the Piramal. On the contrary, the said resolution dated September 7, 1999, and the certificate dated September 9, 1999 (Annexure II at pages 87 to 90) clearly depicts that the company has no right, title or interest on the said shop. 29. It is submitted that the said allotment letter and the certificate dated April 10, 1997, do not create any proprietary right, title or interest in the said shop. It is further submitted that even an agreement for sale does not create any proprietary right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oomi Apartment, two offices including office Shop No. 103 in Ganesh Plaza along with 13 other flats in Tirthbhoomi Apartment were given as collateral security. A copy of the agreement dated July 9, 1997, is at Annexure I page 99. The respondent submits that Shop No. 103 was given as collateral security for the loan taken from Piramal Financial Services by virtue of the aforesaid agreement dated July 9, 1997. The aforesaid shop was never sold to Piramal Financial Services for any consideration. Learned counsel has further submitted that the allotment letter dated April 10, 1997, produced as Annexure A to the Official Liquidator s report and the possession receipt issued to Piramal Financial Services Ltd. were given by Radhe Estate Developer in terms of the agreement dated July 9, 1997. It has been further submitted that no consideration was paid by Piramal Financial Services as alleged. The Official Liquidator has not produced any proof of payment or any payment for the aforesaid shop. 32. Learned counsel has further submitted that it is pertinent to mention here that when the Official Liquidator is claiming ownership of the aforesaid shop on the basis of the allotment letter da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books of PFSL as stock of reality, loans or advances and discharge the borrower of all their obligation on receipt of the said sum in full and final settlement of all the dues payable to PFSL and also the buyer agrees to withdraw for and on behalf of PFSL all the pending suits including the decretal orders instituted/passed against the seller and its group companies/firms at the instance of PFSL. Further, the buyer also agrees to unconditionally return all the documents of title and other documents/papers issued by Radhe Group of Companies/firms in favour of PFSL for the purpose of creating charge in favour of the latter in consideration of loans, etc., received from PFSL." In terms of the aforesaid agreement, the buyer Valor Finstock Pvt. Ltd. undertook to pay the liability of Radhe Group of Companies of Rs. 671.37 lakhs to Pramal Financial Services Ltd. It is pertinent to mention here that Shop No. 103 which was given as collateral security formed a part of the total outstanding loan of Rs. 671.37 lakhs payable to Piramal Financial Services Ltd. by the Radhe Group as on September 7, 1999. The aforesaid MoU is produced at Annexure R1 to affidavit. Mr. Ashish Patel and ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich have been treated in the books of the fourth part as stock of reality, the party of the fourth part agrees unconditionally and irrevocably to release the party of the second part from all the liabilities in its books and further agrees to return all the documents of title and other documents/papers issued by party of the second part for the purpose of creating charge in favour of the party of the fourth part as security for the various loans, advances, etc., availed of and the party of the fourth part also agrees to withdraw all pending suits including the decretal orders instituted/passed against the party of the second part unconditionally and irrevocably." In terms of the MoU dated September 8, 1999, the liability of Rs. 671.37 lakhs payable by the Radhe Group to Piramal Financial Services was taken over by Valor Finstock Pvt. Ltd. The property bearing Survey No. 12/1 situated at Vilupatti village, Kodaikanal, Tamil Nadu, admeasuring 13.5 acres was also given by Valor Finstock Pvt. Ltd. to Piramal Financial Services Ltd. towards the liability of Radhe Estate Developers. 35. It was further submitted that in terms of the aforesaid MoUs Piramal Financial Services Ltd. unc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year 1997 respondent No. 10 or his associates were not in charge of the affairs of the company in liquidation. If the version of the Official Liquidator is assumed to be true then the shop in question that was sold on April 10, 1997, to the company in liquidation was taken as a collateral security subsequently on July 9, 1997. The aforesaid version of the Official Liquidator adduced before this Court is legally not tenable and is without any basis. In the light of the aforesaid facts and circumstances of the case, it was submitted by the respondent that the contentions, averments made in paragraph 6 of the Official Liquidator s report are not correct and are denied by respondent No. 10. It has been further submitted that the shop in question has no nexus to the company in liquidation, the shop which was given as collateral security vide agreement dated July 9, 1997, was released free from any encumbrances in terms of MoU dated September 7 and 8 1999, by the company in liquidation. For the aforesaid reason, the shop was never sold to Piramal Financial Services Ltd. on April 10, 1997, as alleged by the Official Liquidator. 38. In the present proceedings, the Official Liqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Ashish Patel and his associates. 40. It is also pertinent to mention that in a similar case for a flat/shop situated in Ganesh Plaza bearing No. 801 an allotment letter was issued which was verbatim reproduction of the allotment letter dated April 10, 1997, issued for Shop No. 103. In the aforesaid allotment letter, it is also mentioned that the shop was allotted on receipt of full and final payment. The Official Liquidator initiated similar proceedings to seal the premises on the strength of the allotment letter. This Court vide its order dated February 27, 2001, directed the Official Liquidator to deseal the premises as Piramal Financial Services Ltd. has no legal right over the said premises. The Official Liquidator thereafter filed a review application challenging the aforesaid order passed by this Court. This Court while disposing of the review application vide its order dated June 28, 2002, at para 9 held as under : "As against that the OfficialLiquidator has produced only allotment letter dated April 21, 1997, issued in favour of Piramal Finance. Except that no other documents have been produced to show any linkage with the Piramal Finance. In view of this situat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d title over Shop No. 103 and place material before this Court to substantiate fraud as alleged in the Official Liquidator report. The Official Liquidator has neither placed any material before this Court to substantiate his ownership over Shop No. 103 nor produced material evidencing fraud. 42. Learned senior counsel Mr. S.I. Nanavati in this connection relied upon the judgment of the Bombay High Court in the case of Monark Enterprises v. Kishan Tulpule [1992] 74 Comp. Cas. 89 . 42.1 Learned counsel has also relied upon the Madras High Court judgment in the case of N. Babu Janardhanam v. Official Liquidator, Golden Cine Studios (P.) Ltd. [1993] 78 Comp. Cas. 490 . 42.2 It was further submitted that the transaction of sale of Shop No. 103 to Mr. D.P. Shah was complete when the full consideration for the same was paid by Mr. D.P. Shah to Radhe Associates and the possession of the said shop was handed over by Radhe Associates to Mr. D.P. Shah. Once the transaction had been completed and the possession thereof been settled, it cannot be said that the property still stood as collateral security of PFSL. Without prejudice to the foregoing, it is submitted that in any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is section is based upon the Roman maxim Nemo dat quod non habet . The aforesaid maxim has been explained by Benjamin s Sale of Goods, fifth edition, Chapter 7, para 7-001, page 321 where the learned author has observed as under : " Nemo dat quod non habet. The general rule in English law is that no one can transfer a better title to goods than he himself possesses. This rule is often expressed in terms of the Latin maxim memo dat quod non habet. It is partially set out in section 21(1) of the Sale of Goods Act, 1979, which provides subject to this Act, where goods are sold by a person who is not their owner, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had. At one time, the only effective exception to this rule was that of a sale in market overt. But, in response to commercial and social demands, further exceptions to the rule have been progressively introduced both by the common law and by statute. As Denning L.J. has remarked, in the development of our law, two important have striven for mastery. The first is for the protection of property; no one can give a better title t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o interest in the property, he cannot transfer or convey the same in this behalf. 49. It is a general proposition that man can transfer to another what he has, he cannot transfer anything what he has not. In support of this contention which is a general proposition I have referred to section 27 of the Sale of Goods Act, a commentary on Pollock and Mulla, the Roman maxim Nemo dat quod non habet which has been explained by Benjamin s Sale of Goods , which has also been explained in Brooms Legal Maxims . This is a general proposition which I have relied and in support of the same I have referred to all these text books in this behalf. 50. It may be noted that Mr. Nanavati, learned counsel for respondent Nos. 10 and 11 has relied upon one order of this Court in the case of Provisional Liquidator of the Piramal Financial Services Ltd. v. Palash Finvest (P.) Ltd. [Misc. Civil Application No. 12 of 2002 in Company Application No. 290 of 2001, dated 28-6-2002]. However, the facts of the case were quite different which I have noted in para 9 of the said order. In that case the Court has observed that the liquidator has produced only letter of allotment and no other docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control of PFSL, may have handed over the said possession to Shri D.P. Shah to suit his evil design. But, all this is irrelevant since possession is not necessary to constitute ownership of the property. Even if a person is not in possession of a property, he may be the true owner thereof. If he has not given possession thereof to anybody and such person acquires possession otherwise, he is a trespasser and does not acquire any interest in the property. As stated above, PFSL was constituted real owner of the office and it is not shown that it has transferred the ownership thereof to any body. Any person who is in possession thereof cannot claim any right over it unless the owner has given any such right to him which is not the case in the present facts. Thus, the exercise in proving the possession by Shri D.P. Shah of the concerned office is beside the point and irrelevant. 54. From the record it appears that Piramal Financial Services Ltd. was the owner of Shop No. 103 and further Radhe Estate Developers has no right, title or interest in respect of Shop No. 103. So far as Shop No. 103 is concerned, Radhe Estate Developers had no right, title or interest in the said property a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were released in favour of Radhe Estate Developers and Radhe Associates had no title. 58. The agreement of 1999 appears to be collusive since it has been entered into by the parties which were under the control of the same person namely Shri Ashish Patel. As such, it does not inspire any confidence and does not carry any sanctity. It has to be considered with caution taking into account this fact. Moreover, it relates to the release of the charge of PFSL over the property. As stated above, a party which has already transferred the ownership rights over a property does not have any right to create any charge over it. As such, even if it is assumed that PFSL has released the property from the charge, it has no importance since such charge, if at all created, is to be ignored as non est since PFSL had no charge over it since PFSL itself was the owner of the said property. PFSL could not get created a charge in its favour over the said property which belonged to itself. Apart from this, the question here is whether PFSL was the owner of the said property and not whether it had a charge over it and the said charge was lifted. As stated above, PFSL had been constituted the owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchaser Shri Dinesh P. Shah the fact that originally he has handed over the title of the suit property to Piramal Finance. In my view, once he has already transferred the right, title and interest of the suit property to Piramal Finance, he has no right or title over the property in question and, therefore, subsequent transfer is not legal and valid. The said transaction is bad in law and liable to be set aside. In view of the same, I pass the following order : ( i )I, therefore, ratify the action taken by the Official Liquidator for taking possession of assets of company. ( ii )I further direct Shri D.P. Shah to submit original sale deed before this Court. I also direct that Reserve Bank of India to submit the investigation report carried out by chartered accountant. ( iii )This Court was also pleased to constitute a sale committee comprising the Official Liquidator and secured creditors, representative of Reserve Bank of India and workers union if any, so that assets of company can be sold by public auction. In view of the aforesaid observations and directions, the Official Liquidator report is, accordingly, disposed of with no order as to costs. Dictated on July 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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