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TMI Blog2009 (1) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... l Liquidator has to recover mesne profit from 1-9-1999 to March, 2006 in respect of office premises Nos. 102 to 106. Admittedly, Ms. Shefali Doshi has recovered sum of ₹ 5 lakhs on sell of the office premises and hence to the extent of ₹ 5 lakhs the mesne profit should be recovered from Ms. Shefali Doshi. Even otherwise, she is not entitled to retain this amount and it is to be recovered from her and to be appropriated towards mesne profit. - COMPANY APPLICATION NOS. 117 OF 2007, 172 AND 582 OF 2008 COMPANY PETITION NOS. 296 OF 1999 AND 147 OF 2000 - - - Dated:- 12-1-2009 - K.A. PUJ, J. R.M. Desai for the Applicant. T.S. Nanavati and A.S. Vakil for the Respondent. JUDGMENT 1. The Official Liquidator of Piramal Financial Services Ltd., (PFSL) has filed Company Application No. 172 of 2008 praying for the direction to the respondent, namely, Decimal Systems Pvt. Ltd. and Ms. Shefali Doshi to pay to the Liquidator by way of mesne profit and/or compensation calculated at the rate of Rs. 30 per sq.ft. for office premises and at the rate of Rs. 10 per sq.ft. for parking space per month from 1-9-1999 till 29-5-2007 when vacant and peaceful possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n liquidation one Mr. M.V. Subramaniam has executed the rent note. 5. It is the case of the Official Liquidator that under the provisions of section 531/531A of the Companies Act, 1956 transaction entered into within six months or one year as the case may be from the date of presentation of winding up petition are void against liquidator. The winding up petition was presented on 18-10-1999 and rent note was executed on 15-9-1999. Hence the period of one year would be calculated from 18-10-1999. In view of the same, this transaction was hit by the provision of sections 531 and 531A of the Companies Act, 1956. 6. In view of the aforesaid provisions and factual background, the Official Liquidator preferred application being Company Application No. 117 of 2007 praying this Court to declare that rent note dated 15-9-1999 is illegal and not binding on the Liquidator and Liquidator be permitted to take possession of the office premises Nos. 102 to 107 located at Devpath Complex, C.G. Road, Ahmedabad and to direct the respondent No. 1 pending the hearing and final disposal of the application to pay to the Liquidator by way of mesne profit and/or compensation calculated at the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of them has no right to remain in the occupation of the premises. This Court vide its order dated 4-5-2007 observed that prima facie all the alleged transactions are bogus and the respondent had not come out with clean hands and had not only suppressed material facts but had tried to mislead this Court. 10. Mr. R.M. Desai, learned advocate appearing for the Official Liquidator has submitted that as per the order dated 8-5-2007 Mr. Jayantibhai Somabhai Patel, sole proprietor of Alphanso Enterprise handed over possession of office premises Nos. 102 to 106 admeasuring 1454 sq. ft. together with proportionate parking space to the Official Liquidator. The respondent No. 1 had paid the compensation upto date of handing over the possession of office premises No. 107 to Liquidator. As far as office premises No. 107 is concerned, this Court has directed the respondent No. 1 to pay mesne profit at the rate of Rs. 5 per sq.ft. from 15-9-1999 till actual handing over possession. As regards mesne profit for office premises Nos. 102 to 106 and parking space are concerned, the Liquidator was directed to prefer separate report. In view of this direction the present company application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Apurva Doshi had made investment in 1250 optional fully convertible debentures (OFCDs) of the face value of Rs. 1.25 lakhs and 4500 cumulative deposits of the face value of Rs. 4.50 lakhs, aggregating to Rs. 5.75 lakhs. The due dates of the said investment were during the period from 3-6-1999 to 1-8-2000. The total maturity amount was approximately Rs. 8,17,000. The company was owner and in possession of office premises Nos. 102 to 106 admeasuring 1454 sq.ft. on the First Floor of Devpath Complex, behind Lal Bungalow, Ellisbridge, Ahmedabad from one Dev Enterprise, a sole proprietary concern of one Sanjay Amin HUF. The PFSL being in financial difficulty was unable to pay the maturity amounts of the aforesaid investments. As a result, a memorandum of understanding dated 1-9-1999 came to be executed between the company-PFSL, the said Apurva Doshi and the respondent No. 2 and Dev Enterprises by which it was agreed by the respondent No. 2 to acquire office premises Nos. 102 to 106 at a price of Rs. 8,72,000 free from all encumbrances by adjusting the maturity and pre-matured encashment proceeds of the aforesaid investment. Mr. Vakil has further submitted that the respondent No. 2 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pursuant to this agreement as well as undertaking, the office premises Nos. 102 to 106 stood transferred to the said Mr. Jayantibhai Somabhai Patel for consideration of Rs. 5 lakhs and the respondent No. 2 stood discharged completely from all liabilities, present or future with regard to the said office premises Nos. 102 to 106. 16. In the aforesaid factual background, Mr. Vakil has submitted that the respondent No. 2 was never in actual and physical possession of the office premises Nos. 102 to 106 despite the execution of memorandum of understanding dated 1-9-1999. The said memorandum of understanding does not record that the possession of the office premises Nos. 102 to 106 has been handed over to the respondent No. 2. The possession was to be given only after completing necessary formalities as per clause (4) of the memorandum of understanding dated 1-9-1999. Without completing the formalities and without handing over possession of the office premises Nos. 102 to 106, the Company - PFSL executed the rent note dated 15-9-1999 in favour of the respondent No. 1 in respect of the office premises Nos. 102 to 107. In view of the averments made in H.R.P. Suit No. 1063 of 2000 the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2008 is concerned, Mr. Vakil has submitted that on the basis of documents on record of Company Application No. 582 of 2008 and Company Application No. 172 of 2008, there is no conclusive evidence to suggest that the office premises Nos. 102 to 106 are of the ownership of the Company - PFSL. On the contrary, from the documents on record, the ownership of office premises Nos. 102 to 106 apparently seems to be of Dev Enterprises/Devland Developers Pvt. Ltd. To substantiate this proposition he submitted that memorandum of understanding dated 1-9-1999 is executed between the Company - PFSL as a party of the first part, Ms. Shefali Doshi and late Apurva Doshi as party of the second part and Dev Enterprise as party of the third part. The Company - PFSL has stated in the said memorandum of understanding dated 1-9-1999 that it has right of disposal of office premises Nos. 102 to 106. It has been further stated in the said memorandum of understanding that Dev Enterprises/Devland Developers Pvt. Ltd., has given the office premises Nos. 102 to 106 to the Company - PFSL against the finance availed by Dev Enterprises/Devland Developers Pvt. Ltd. and, therefore, has joined in the agreement as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s executed on 1-9-1999 and the winding up petition was filed on 21-10-1999. That under section 536(2) of the Companies Act, 1956 any disposition of the property of a Company made after the commencement of winding up, shall, unless Court otherwise orders, be void. As the memorandum of understanding dated 1-9-1999 is executed prior to the commencement of winding up section 536(2) of the Companies Act will not be applicable to the facts of the present case. He has further submitted that section 531(A) will not apply to a transfer of a property of the company made to a creditor within a period of one year immediately preceding the date of presentation of petition for winding up. The transfers contemplated under section 531(A) are only transfers to non-creditors. In this view of the matter, reliance placed on the Official Liquidator to treat the transaction forming subject-matter of the memorandum of understanding dated 1-9-1999 is void against the Liquidator by placing reliance upon section 531(A) or 536 of the Companies Act, 1956 is wholly misconceived and inapplicable. Section 531(A) or 536 will have no application to the facts of the present case. 23. Mr. Vakil further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount was approximately Rs. 8,17,000. He has, therefore, submitted that Ms. Shefali Doshi and late Mr. Apurva Doshi are creditors of the Company - PFSL on 1-9-1999. They have become creditors of the Company by virtue of having subscribed to the OFCDs and the Cumulative Deposits. He has further submitted that section 531 of the Companies Act, places the onus/burden on the Official Liquidator to establish that the transfer of property made by the Company - PFSL to Ms. Shefali Doshi and late Mr. Apurva Doshi, within the period of six months immediately preceding the date of presentation of the winding up petition, is deemed a fraudulent preference of its creditor. The Official Liquidator has failed to discharge the said burden. There is no evidence, much less any direct evidence to suggest that the Company - PFSL transferred office premises Nos. 102 to 106 with a view to give a preference, much less a fraudulent preference to them. He has further submitted that the onus is on the Liquidator to prove that the dominant intent of the Company - PFSL was to prefer these persons and where there is no evidence much less any direct evidence or any such intent, the intent to prefer cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Vakil has further submitted that the Official Liquidator has not even remotely made any allegation of fraud in his affidavit in reply. The tone and tenor of the affidavit in reply of the Official Liquidator only suggest that simply because the transaction reflected in the memorandum of understanding dated 1-9-1999 being within the period six months immediately preceding the date of presentation of the winding up petition, the same is deemed to be a fraudulent preference and liable to be treated as invalid. No allegation of fraud has been made nor any particulars of it are given by the Official Liquidator. The distinction has to be drawn between fraudulent preference and preference simpliciter. In these circumstances, it cannot be said that the Company - PFSL showed any undue preference to the applicant. Section 531 of the Companies Act comes into play only if a fraudulent preference has been shown in any transaction. 27. Mr. Vakil has further submitted that the essence of fraudulent preference is the giving of an improper benefit to a few creditors leading to inequality between them and the generality of creditors. In order to establish that fraudulent preference was shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to office premises Nos. 102 to 106. Further assuming that the Company - PFSL possessed a clear and a marketable title to office premises Nos. 102 to 106 the transaction at any rate, cannot be impugned/challenged by the Official Liquidator by placing reliance upon section 531(A) and section 536 of the Companies Act. Insofar as section 531 of the Companies Act is concerned, Mr. Vakil submitted that on a plain and simple reading of the affidavit in reply of the Official Liquidator he has failed to discharge the burden to establish that the transfer was a fraudulent transfer. He has, therefore, submitted that the application moved by the applicant deserves to be allowed. 30. Mr. Roshan Desai, learned advocate appearing for the respondent - Official Liquidator in this application has referred to the various contentions raised in the affidavit-in-reply filed by the Official Liquidator on 1-12-2008. He has submitted that the transaction of disposing of the office premises Nos. 102 to 107 in Devpath Complex is a fraudulent preference in favour of creditor. Several depositors had approached Company Law Board for a direction that Company be directed to refund the deposit with interest. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of Company in liquidation and, hence, the said Dev Enterprise and Devland Developers Pvt. Ltd., cannot make such statement. Perusal of the said undertaking would lead to believe that it is Dev Enterprise and Devland Developers Pvt. Ltd., who are selling the property and not the Company in liquidation. It is also surprising that consideration of so called sale is adjustment of amount due from Company in liquidation. It is also surprising that when substantial amount is due and payable by Dev Enterprise and Devland Developers Pvt. Ltd., to company in liquidation the whole transaction entered into between the company in liquidation and late Apurva Doshi and Shefali Doshi and Dev Enterprise is a fraud and in collusion with each other to deprive the company in liquidation of its assets, security and amount. 34. Mr. Desai has further submitted that the Certificate of title does not create any title in favour of Ms. Shefali Doshi. The person issuing certificate has not perused the documents produced being memorandum of understanding and receipt dated 1-9-1999. If the property is of the ownership of Company in liquidation than satisfaction of charge on security is required and sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise for a consideration of Rs. 5 lakhs in 2006. The Official Liquidator has already taken the possession of these office premises from the said Shri Jayantibhai Somabhai Patel. It appears that Shri Jayantibhai Somabhai Patel has filed Summary Suit against Ms. Shefali Doshi for recovery of amount of Rs. 5 lakhs, and possibly for this reason, she has preferred the present applica- tion before this Court. Be that as it may, the facts remain that the memorandum of understanding was executed on 1-9-1999 and that date falls within the period of six months prior to the date of commencement of winding up proceeding as the first winding up petition against the company was filed on 18-10-1999 or 21-10-1999. There is no dispute about the fact that the applicants are creditors of the Company - PFSL. The office premises Nos. 102 to 106 are given to them in lieu of the amount due to them by the Company - PFSL. There are thousands of other creditors, who have to recover amount from the Company - PFSL. Ignoring the claim of all other creditors the office premises were offered to the applicants and they were in fact given to them. Thus, it can certainly be said that they were given preference in di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors and the transactions amounted to fraudulent preference hit by sections 531 and 531A of the Companies Act and were liable to be quashed. The application by the transferee for desealing the premises could not be granted. 37. The facts in the present case, are more or less similar. On the contrary, they are worst than the earlier case. As rightly pointed out by the Official Liquidator in his affidavit that no document was executed, only under memorandum of understanding, the property was sought to be transferred. The Court is, therefore, of the view that the transaction is clearly hit by the provisions of section 531 of the Companies Act, 1956, and it amounts to fraudulent transfer. In view of the binding decision of this Court the authorities cited and contentions raised by Mr. Vakil cannot render any assistance to the case of the applicant. 38. Once it is held that the transaction in question is hit by the provisions of section 531 and it is a fraudulent transfer the question remains as to the payment of mesne profit and that to by whom. The documents produced on record reveal that for a certain period the possession is stated to have been with the respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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