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TMI Blog2008 (11) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... COMPANY APPLICATION NO. 188 OF 2007 IN COMPANY PETITION NO. 147 OF 2000 - - - Dated:- 10-11-2008 - K.A. PUJ, J. R.M. Desai for the Applicant. Nanavati Nanavati for the Respondent. JUDGMENT 1. The Official Liquidator has taken out this Judge s Summons praying for permission of this Court to execute the Consent Decree dated 20-11-1998 and 21-1-1999 passed by the City Civil Court in Civil Suit No. 3111/1998 to Civil Suit Nos. 3114/1998 and 3110/1998 respectively to recover and release the sum of Rs. 7,07,18,00,000 due as on 1-1-2000 together with interest at the rate of 36 per cent per annum from 1-1-2000 till payment or realisation. The Official Liquidator has also prayed for permission to execute the Consent Decree passed by the City Civil Court in Civil Suit No. 3115 of 1998. The Official Liquidator has prayed for permission to take possession of the Securities being Office No. 202 admeasuring 1,100 sq. feet, Office No. 203 admeasuring 1115 sq. ft. and Office No. 204 admeasuring 890 sq. ft. respectively aggregating 3,105 sq. ft. situated at 2nd Floor in the Building known as Swagat , C.G. Road, Ahmedabad - 380 009 with undivided share in the open terrace ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying and being at Mouje Changispur, City Taluka in the Registration District and Sub-District of Ahmedabad. The respondents obtained a loan from PFSL. By an Agreement dated 14-6-1996, properties of Radhe Estate Developers were given as collateral security for the said loan. However it is not clarified as to what is the proper security given to PFSL. Radhe Estate Developers and Shri Ashish Patel who guaranteed the amount due and payable by Radhe Estate Developers under the Loan Agreement committed a default in payment of the amount due and payable. In view of the default committed in payment of the amount due and payable by the respondents, the Company filed Civil Suits in City Civil Court, Ahmedabad being Civil Suit Nos. 3110 of 1998 to 3115 of 1998 for judgment and decree for the amount mentioned in the plaint in each of suits together with interest thereon at the rate mentioned in the plaint. Para 3 of the Plaint gives details of the amount lent and advanced by the Company to the respondents. Negotiations took place between the Company and respondents and ultimately settlement was arrived at between the parties and Consent terms signed by the parties were filed in each of the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and his associates decided on 7-9-1999 to hand over controlling interest in the Company to Vellor Finstock Private Limited (VFPL), Mumbai. It was also averred that pursuant to Memorandum of Understanding dated 8-9-1999, by which it is stated that partial consideration would be paid by VFPL. Along with the said Affidavit, an Agreement dated 7-9-1999 which was entered into between Shri Ashish Patel and others on the one hand and VFPL on the other hand was produced. Thereafter, additional affidavit dated 1-12-2003 was filed by Shri Ashish Patel in O.L.R. No. 56 of 2003 wherein it is clearly stated that Radhe Estate Developers, a Partnership Firm took a loan from PFSL on 14-6-1996 and properties of Radhe Estate Developers were given as collateral security for the said loan. It is also averred that Memorandum of Understanding was entered into on 7-9-1999 between Shri Ashish Patel and his associates as Seller and VFPL as buyer. Clause 2 of the said Memorandum of Understanding dated 7-9-1999 reads as under: "Simultaneously buyer has stipulated and seller has consented to discharge total dues of Radhe Group of Companies (Borrower) aggregating to Rs. 671.37 lakhs payable to Piramal Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the party of the Third Part, i.e., Vellor Finstock Private Limited is desirous of taking up the liability of the party of the Second Part to the party of the Fourth Part and for that purpose, the Memorandum of Understanding is entered into. By the said Memorandum of Understanding, it is provided that on party of the Third Part taking up the liability of Rs. 671.37 lakhs of the party of the Second Part towards the party of the Fourth Part, the party of the Second Part is discharged of its liabilities and obligations of the party of the Fourth Part of Rs. 671.37 lakhs. It was also provided that party of the Third Part expressly confirms without any demur or dispute in future of having taken up the liability of Rs. 671.37 lakhs of the party of the Second Part and owes an identical amount of Rs. 671.37 lakhs to the party of the Fourth Part. 10. It was also provided that the party of the Third Part agreed to offer the properties bearing Survey No. 12/1 situate at Villupate Village, Kodaikanal, Tamil Nadu to the extent of 13.5 acres in favour of the party of the Fourth Part as security to the latter s satisfaction which would cover the party of the Third Part s liability of Rs. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility is taken over by the holding company, VFPL. The draft of the said agreement was approved by the Directors of PFSL at the meeting held on 7-9-1999 on which date Shri Ashish Patel and his associates were Directors of the Company-in-liquidation. He has therefore submitted that such a resolution is void ab initio as any transaction relating to immovable property of Rs. 100 or more is to be done by a Registered Document. Release of Security is a transaction which is required to be completed by a Registered Document. Since there is no registered document releasing security, such a transaction is void ab initio. 14. Mr. Desai has further submitted that in Official Liquidator, Piramal Financial Services Ltd. v. Dena Bank [2004] 122 Comp. Cas. 967 1 , this Court has referred to the Memorandum of Understanding dated 7-9-1999 and observed that simply by taking over the liability, it cannot be said that the amount is paid to the Creditor. He has further submitted that by Consent Decree, Radhe Developers (I) Limited, Radhe Estate Developers (Partnership Firm) and Shri Ashish Patel agreed that a Decree for Injunction is to be passed and by such decree of injunction, they are r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ashish Patel, his family members and associates transferred the controlling interest in the Company to VFPL, Mumbai and thereupon ceased to be in the Management of the Company and he resigned as Chairman and Managing Director with effect from 7-9-1999. On 7-9-1999, an Agreement recording the transfer of shares and liability was executed between Shri Ashish Patel, his family members and associates and the said VFPL recording the terms of transfer of shares and Management. On the next day, i.e., 8-9-1999 another agreement came to be executed between Shri Ashish Patel, his family members and associates, the said VFPL and the said PFSL. By virtue of the said agreement, VFPL took up the liability of Shri Ashish Patel and his associates amounting to Rs. 671.37 lakhs payable to PFSL and the same was agreed upon by PFSL and Shri Ashish Patel and his associates were relieved from their obligations to pay the amount due and payable. Thus, on 8-9-1999 the liability of Shri Ashish Patel and his associates stood crystallized at Rs. 671.37 lakhs. Thus the liability stood fully discharged on 8-9-1999 in view of the said Agreement. In furtherance of the said Agreement dated 8-9-1999, PFSL issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the Agreements dated 7-9-1999 and 8-9-1999 were declared illegal in collateral proceedings and it has no effect on the present proceedings. He has further submitted that the Resolution was duly passed by PFSL on 7-9-1999 and it was placed on the record of Company Application No. 135 of 2007 at Page 236. Mere non-affixing of the common seal of the Company does not invalidate the resolution. He has further submitted that the Order passed by the Trial Court on 21-9-1999 is a judicial order. It has become final and parties have given effect to the said order and parties are bound by it. Unless it is set aside after following due process of law, the Official Liquidator is not entitled to any relief in the present proceedings. 17. Having heard learned advocates appearing for the respective parties and having gone through the contents of the application as well as affidavit filed on behalf of the respondents and having considered the relevant statutory provisions as well as the authorities on the subject, the Court is of the view that none of the contentions raised on behalf of the respondents bear any substance or merits and the same deserves to be rejected. The main thrust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company-in-liquidation. Under section 446 of the Act, the legislative intent to permit the High Court to initiate proceedings straightway as if they were proceedings of the Court of an appropriate jurisdiction is clear; that there should be no impediment in the way of the liquidator necessitating his getting involved in unnecessary litigation as there is public accountability after a winding up order has been passed to determine the liquidation proceedings as expeditiously as possible and tenants of companies under winding up cannot stretch the winding up proceedings to suit their personal interest. Once it is found that a person is a trespasser, proceedings under section 446 of the Act are "due process of law" and the trespasser as such can be directed to be evicted and such direction cannot be said to be without due process of law. The Court can always make an order which is just and proper in the facts and circumstances of a case and it is immaterial as to what the prayers are in the application and particularly in winding up proceedings, whenever the court discovers any property of the company in the possession of the anybody since the court is to administer justice and to pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... khs payable by the Radhe group to Piramal Financial Services was taken over by Vellor 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 Vellor Finstock Pvt. Ltd., to Piramal Financial Services Ltd., towards the liabilities of Radhe Estate Developers. The same contentions were raised on behalf of the respondents in that case which are raised in the present case. The Court took the view that by taking over the liability, it cannot be said that the amount is paid to the creditor. The security can be released only on payment being made of the debt and not otherwise. The Court further took the view that the agreement of 1999 appears to be a collusive since it has been entered into by the parties which were under the control of the same person, namely, Ashish Patel. As such it does not inspire any confidence and does not carry any sanctity. This judgment is a complete answer to the contention raised before the Court on behalf of the respondents. OJ Appeal filed against this judgment is also dismissed. In Radhe Associates v. O.L. of Piramal Financial Service Ltd. [2007] 135 Comp. Cas. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (VFPL) on 7-9-1999 disinvesting their controlling interest in the company-in-liquidation in favour of VFPL, subject to the terms and conditions contained therein. Immediately on the next day i.e., on 8-9-1999 another MoU was executed between four parties, the contents of which are already discussed earlier. It is surprising and shocking that this agreement is signed by the same person on behalf of VFPL and the PFSL (Company-in-liquidation). 25. Based on the above agreement dated 8-9-1999, pursis dated 21-9-1999 was filed under which all decrees passed in Civil Suit Nos. 3110 to 3115 of 1998 were stated to have been satisfied. This pursis was signed by Shri Ashish Patel for himself as well as for and on behalf of Radhe Developers and Smt. Madhuben P. Patel. It was not signed by the decree holder i.e., the PFSL (Company-in-liquidation). An endorsement of No objection was made by some one without disclosing his name or without mentioning as to on whose behalf such endorsement was made. Though the copy of said pursis was given to learned advocate to file necessary reply, the learned Trial Judge had passed an order on the same day i.e., 21-9-1999, after considering the endor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or is permitted to execute the said decree against the respondents/judgment debtors for recovery and realization of the decretal amount. The Official Liquidator is further permitted to take possession of the security being office Nos. 202, 203 and 204 admeasuring about 1,100 sq.ft. 1,115 sq.ft. and 890 sq.ft respectively, situated at 2nd floor, in the building "Swagat" C.G. Road, Ahmedabad with undivided share in the open terrace and shares held by them if any as Members of Association. Since the Official Liquidator is permitted to recover the decretal amount with interest, there is no question of issuing any direction for recovery of any mesne profit and/or compensation for use of the above referred premises by the respondents. 27. This application filed by the Official Liquidator is accordingly allowed in the above terms, without any order as to costs. 28. While deciding this application, the Court has referred to the document produced in Company Application No. 135 of 2007 which was filed by Radhe Estate Developers which was disposed of by this Court on 29-1-2008 and while disposing off the said application, the Court has directed the office to keep the papers of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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