9911796707
TMI Blog2012 (4) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... over the company. Since, company is unable to show that transactions of sale of immovable properties were necessary or for the purpose of augmenting resources to discharge the company’s debts. Hence they being fraudulent, the title therein may not be deemed to have passed at all from the company – Decided in favor of petitioner. - CA No. 34 of 2012, CP No. 13 of 2009 - - - Dated:- 26-3-2012 - SANJIB BANERJEE, J. For the Petitioning-Creditor: Mr Ravi Kapur, Adv., Ms Manju Bhuteria, Adv., Mr R. Medora, Adv., Mr M. Mukherjee, Adv., Mr Arijit Law, Adv., Mr B.M. Sharma, Adv. For the Company: Mr Utpal Bose, Adv., Mr D.N. Sharma, Adv., Mr A. Chowdhury, Adv., Ms Debjani Chatterjee, Adv. SANJIB BANERJEE, J. : Years of waiting to be paid its dues and the perceived daylight robbery in the company have prompted this petitioning-creditor to seek the immediate appointment of a provisional liquidator over the company even as the matter as to whether the company should be wound up is pending consideration. The petitioning-creditor asserts that if there is any modicum of corporate decency that the law in this country recognises and there is any meaning left to the princi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch, 1998, the petitioning-creditor served a notice under Section 434 of the Companies Act, for recovery of an amount in excess of Rs.6 crore which included a principal component in excess of Rs.3.61 crore. Based on such statutory notice, the petitioning-creditor instituted CP No. 263 of 1998 for the winding-up of the company. Such petition was dismissed in view of the Section 22(1) of the said Act of 1985 since a reference had been made by the company to the BIFR prior to the filing of such petition. The company made the reference under the said Act of 1985 to the BIFR in January, 1998 and the matter was registered as Case No. 14 of 1998. In June, 1998 the BIFR declared the company to be a sick industrial company within the meaning of that expression in Section 3(1)(o) of the said Act of 1985 and appointed an operating agency to undertake an exercise of rationalising the debts of the company and preparing a scheme for the company s rehabilitation. The original operating agency was subsequently replaced. In a draft rehabilitation scheme circulated by the company in 2003, this petitioningcreditor s dues were shown at Rs.224.04 lakh. The petitioning-creditor has relied on the documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r XIIIA of the Rules on the Original Side of this court) having ultimately been disposed of by requiring the company as the defendant therein to deposit a sum of Rs.1 crore to be entitled to defend such action, the petitioning-creditor is not entitled to proceed with the present winding-up proceedings. The stand taken by the company is a deliberate attempt to mislead the court to create the illusion of a defence to the petitioning-creditor s claim in the present proceedings which is founded on an admission made by the company in a draft rehabilitation scheme presented before the BIFR. A copy of the plaint relating to the suit is appended to the present application. Paragraph 22 of the plaint reads as follows: 22. In spite of demands, the defendant has failed neglected and refused to pay the said sum or any part or portion thereof. By virtue of the aforesaid order of AAIFR, the plaintiff is entitled to sue and sues the defendant for the balance sum of Rs.7,42,68,827.85 after keeping aside the above stated sum of Rs.2.03 crores admitted before the AAIFR. Notwithstanding such statement, the petitioning-creditor s claim in the suit was for the entire sum of Rs.9,45,68,827.85p as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the order of the Division Bench of this court, the company has been permitted to deposit an amount of Rs. one crore within one week of the order dated September 21, 2007 passed by the Supreme Court. The parties herein have made no submission whether the special leave petition or the possible appeal arising therefrom has yet been disposed of. Following the petitioning-creditor s statutory notice dated May 26, 2008 on which the present winding-up proceedings have been based, the company replied on June 18, 2008 that the sum of Rs.2.03 Crore is the subject matter of CS No. 194 of 2003 and also the subject matter of the application made under Chapter 13A of the Original Side Rules for summary judgment and an order has been passed finally by the Hon ble Supreme Court of India. It was at such stage that the petitioning-creditor may have realised that the principal relief claimed in its suit mistakenly included the claim for Rs.2.03 crore on which the petitioningcreditor intended to institute winding-up proceedings. The petitioning-creditor lodged the present winding-up proceedings in the year 2009 but prior thereto it applied in its suit for amendment of the plaint relating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustrial company. Such factors could be that there are no funds shown to repay the creditors or the repayment schedule does not appeal to the BIFR or other like reasons. But once a sick industrial company shows an amount to be outstanding to a particular creditor in a draft rehabilitation scheme, it is an admission by the company of its acknowledged extent of indebtedness to the creditor and can be discredited on very limited grounds. The company has not urged any ground to discredit the admission, its only submission on the admission evident in the relevant draft rehabilitation scheme is that the acknowledgement of the figure therein as being outstanding to this petitioning-creditor does not amount to any admission on the company s part. Prima facie, the claim of the petitioning-creditor in the present proceedings appears to be unimpeachable. The petitioning-creditor has, thus, qualified for the other grounds urged in support of its prayer for the appointment of a provisional liquidator over the company to be looked into. The discussion on such aspect of the matter should be in the light of the facts recorded in the relevant draft rehabilitation scheme as the background therefor: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted a modified DRS on 21.3.2002 and further information/statements, sought by this Authority (orders dated 27.3.2002 and 11.4.2002), on 24.4.2002, which have been examined and the present DRS-02 is prepared with the cut-off date 31.3.2002. The reference relating to the company remained pending before the BIFR from January 19, 1998 with no apparent scheme having been formulated by the BIFR for nearly a decade. Meanwhile, merely by virtue of the pendency of the reference, the company enjoyed the suspension of legal proceedings, contracts and the like under Section 22(1) of the said Act of 1985 save to the extent the BIFR or the AAIFR granted leave to any person to bring any claim or enforce any contract against the company. It is a matter of common knowledge and a notorious fact that the said Act of 1985 which was brought into existence as a beneficial legislation, inter alia, to prevent the loss of employment, has been grossly misused by industrial companies and, in the odd case, by even nonindustrial companies only to enjoy the temporary immunity recognised by Section 22(1) of the Act and to stretch the period of invulnerability to as long as possible. The Act which wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ienation of its valuable properties during the year 2006-07 is of no concern to the company court in seisin of the proceedings for the company being wound up. The company proffers no explanation for having indulged in a spree of transfers of its treasured immovable properties, nor does it make any attempt to justify the consideration received therefor or demonstrate the availability of the funds in its till. In exercise of its powers under said Act of 1985, the BIFR had appointed a nominee on the board of directors of the company. Such nominee reported to the BIFR sometime in the year 2007 that the company had sold some of its valuable immovable properties without either a reference to the BIFR or to the assets sales committee that had been put in place to consider raising funds for the rehabilitation of the company upon sale of some of its non-core assets. The arrogant stand of the company before the BIFR upon being confronted with such matter, the impunity with which those in the management of the company proceeded to conduct themselves and the scant regard that the company and its management have shown to those that the company owed money and to those that had once toiled to put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JM was called on 3.5.2007 but the company did not attend the meeting on the ground that their networth had turned positive and they had applied for de-registration from BIFR. The OA s representative further submitted that the company s shares were not being quoted on the Stock Exchange and the networth of the company as per the balance-sheet as on 31.3.2005 stood at (-) Rs.330.92 crores. The factories had remained closed since the year 2000 and had run for a few days only and only a few tyres had been manufactured. Hence, the operating loss during this period was bound to increase. Accordingly, the networth of the company as on 28.2.2007 (the date of the recent balance-sheet) could not have turned positive through its core activities. However, mainly because of profit on sale of assets (Rs.335.66 crores), profit on sale of shares (Rs.1.87 crores) and profit under miscellaneous heads for Rs.0.40 crores, the company had shown a profit of Rs.110.03 crores during 2006-07 and networth has been shown as positive. SBI s representative submitted that the details of the assets sold were not available with the Banks/OA. This is not acceptable since it does not reflect the true performance a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- i) DIL be directed not to dispose of any of its assets without BIFR s consent pending preparation or consideration of a rehabilitation scheme under SICA. ii) Transfer of assets including non-core assets, made by the company to its subsidiaries and/or other third parties be immediately recalled and set aside and the assets may be reinstated in the books of DIL. iii) At the application for de-registration made by the company be dismissed in limine. 24. The company s counsel did not give any specific reply to the query from the Bench whether the company obtained BIFR s permission to sell/transfer assets and whether the ASC procedure was followed. After considering the submissions made and the material on record, the Bench observed that the Special Director (DIFR s Nominee) on the company s BOD had informed that the company had sold/transferred some of its assets without routing through the Assets Sales Committee (ASC) or without the consent of the ASC. He has also reported that the authorized share capital was increased from Rs.70 crore to Rs.175 crore(permission given for Rs.75 crore). As the counsel for the company wanted a copy of the said report the Bench directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant company. Further, the appellant company had not complied with the directions given by BIFR on 11.4.2007. It is in this context that BIFR had given a further opportunity to the appellant company to furnish relevant information/details in order to determine whether DIL should be discharged from the purview of SICA on account of its net worth becoming positive as on 28.2.2007. We do not find any justification for interfering with the impugned order passed by BIR which is in the nature of an interlocutory order. We also find that BIFR has not given any finding whether the company should or should not be discharged from the purview of SICA. BIFR had sought additional information/details which are indicated at para 25 of the impugned order. We, therefore, dismiss the appeal and direct the appellant company to expeditiously furnish the relevant information/details sought for by BIFR vide para 25 of the impugned order dated 23.7.2007. Prior to the aforesaid orders of the BIFR and AAIFR being passed, the company had instituted proceedings under Article 226 of the Constitution of India before the Madras High Court against seizure of certain goods by the customs authorities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a disclosure in respect of related parties. The names of 50 companies figure in such list, including Dunlop India Limited, Shalini Properties Developers Private Limited and SPR Resorts Limited. The notes on accounts under Schedule V to the balance-sheet declare that the company was incorporated on February 23, 2007. There is also an announcement that the company had purchased Land worth Rs.80 Crores from Dunlop India Limited, and allotted 8,00,000 Equity Shares of Rs.10/- each at a premium of Rs.999/- per share towards consideration. The final note says that 8,09,900 equity shares in the company had been transferred to Radiant Investments Limited (of Mauritius) on January 16, 2008. What is evident, therefore, from the balance-sheet of Dunlop Properties for the year ended March 31, 2008 is that it had only been incorporated about a year back, that it had acquired a property worth Rs.80 crore from Dunlop India Limited against shares in such company issued to Dunlop India Limited and that probably the entirety of the shares obtained by Dunlop India Limited in Dunlop Properties as consideration for the sale of the property superficially said to be worth Rs.80 crore was transferr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the worthless shares of Dunlop Properties that Dunlop India Limited obtained were transferred to a Mauritius company to delink the transaction. The company and those in management thereof had meticulously planned the entire scheme with the skill of a trained killer. There is more to the matter. The Ambattur property stolen from the company s fold and parked with Dunlop Properties must have been worth substantially more than Rs.575 crore since banks keep a margin before granting credit facilities against any immovable property. Such position is confirmed from the balance-sheet of Dunlop Properties for the year ended March 31, 2011 where its land and building is valued at Rs.614.46 crore against the valuation therefor in the previous financial year of Rs.80.04 crore. The company, it is obvious, sold one of its landed properties at a gross undervalue to an entity controlled by the same management. That the land was sold at an undervalue is evident both from the fact that ICICI Bank agreed to grant credit facilities of value of Rs.575 crore against it and the fact that its present value is shown to be in excess of Rs.614 crore by the company that now holds it. Just to emphasise the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Again, the company has volunteered no information as to the consideration that it received for transferring the dud shares that it held in Dunlop Infrastructure to Dunlop Investments Limited. The petitioning-creditor refers to the balance-sheet of a third company, Dunlop Estates Private Limited (hereinafter referred to as Dunlop Estates), for the year ended March 31, 2008. Such balance-sheet shows that Dunlop Estates had issued 3,10,000 shares therein of Rs.10/- each fully paid up. In its notes on accounts under Schedule V to the balance-sheet as at March 31, 2008, Dunlop Estates shows a similar list of 50 related parties as in the cases of Dunlop Properties and Dunlop Infrastructure. Dunlop Estates was incorporated on February 27, 2007. It had cash and bank balance of value of Rs.11,000/ as at March 31, 2008 and had not commenced its commercial activities till such date. Yet, Dunlop Estates purchased land worth Rs.30 Crores from Dunlop India Limited, and allotted 3,00,000 Equity Shares of Rs.10/- each at a premium of Rs.990/- per share towards consideration. Again, company Dunlop India Limited transferred its entire shareholding in Dunlop Estates to Dunlop Investments Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1,012 crore within the next two years, it would not be uncharitable to the company or its management to see that the two other properties ostensibly valued at Rs.60 crore and Rs.30 crore may collectively have been worth about Rs.700 crore. There is no doubt that a company has a right to sell its properties and the prices at which it sells its properties may not be justiciable. But such principle which is founded on the doctrine of indoor management like the rule as to freedom to extend one s arm as long as it does not touch another s nose - is not absolute; and a company s act of selling its assets should not be opposed to public interest or seen to cause unfair prejudice to another if such other is entitled to complain of it before a court of law. The company would have been perfectly justified in selling off its properties to meet its debts and pay off its creditors or its employees and workmen. This company did not take such a mundane road. Instead, it effected the transfers, or most of them, when its creditors had no access to it or its properties by virtue of the protection that it enjoyed under the said Act of 1985 and the company did not use the money to pay off its cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a provisional liquidator would be justified at page 819 of the report: It is neither possible nor desirable to exhaustively enumerate the situations in which a provisional liquidator may be appointed by the company court. I would, however, give illustration of cases where appointment of a provisional liquidator would be justified. Some such illustrative situations can be broadly listed as under: a) where the company is virtually insolvent or the substratum of the company had disappeared and a strong prima facie case is made out; b) where the assets of the company are in jeopardy; c) where it is proved by a strong prima facie case that the management representing the majority shareholders of the company is conducting the business of the company to the prejudice of the company and the minority shareholders as if their own (and) contrary to normal business principles proving lack of probity and jeopardy to the interest of complaining shareholders; d) where the majority of the shareholders in collusion with each other are indulging in acts of manipulation and purported transactions which appear on their face to be a subterfuges or bogus; e) public interest; f) interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 53 of the Transfer of Property Act defines fraudulent transfer. Sub-section (1) of Section 53 of such Act prescribes that every transfer of immovable property made with intent to defeat or delay the creditors of the transferors shall be voidable at the option of any creditor so defeated or delayed. The provision permits a suit to be instituted by a creditor of the transferor in representative capacity for the benefit of all the creditors. That Section 53(1) of such Act does not affect any law relating to insolvency only implies that it does not derogate from any law relating to insolvency. There is, therefore, the recognition in the general law of this country for a creditor to regard the transfer of an immovable property by the debtor to be fraudulent in some circumstances. The claims of the numerous creditors of the company have been taken up at the post-advertisement stage of CP No. 233 of 2008 and CP No. 159 of 2011. The number of creditors joining the fray to support the order of winding up is increasing by the day. Three companies alleging to be creditors of Dunlop India Limited have also appeared to oppose the winding-up. Such creditors, India Tyre and Rubber Company Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R on 23rd April 2007 inter alia praying for an order directing de-registration of BIFR Case No. 14 of 1998. Ultimately, the company was able to come out of the provisions of the Sick Industrial Companies (Special Provisions) Act 1985. The properties which were transferred during the period 2006-2007 inter alia included the Worli property in respect whereof the news articles were published in the Times of India, Mumbai edition. I state and submit that after 2006-2007, the Worli property never belonged to the company. The factum of transfer of certain assets during the period 2006-2007 was within the knowledge of the Hon ble High Court at Madras as well as the Appellate Authority for Industrial and Financial Reconstruction which would appear from the judgement and order dated 19th December 2007 passed by the Hon ble High Court at Madras as well as the Order dated 3rd March 2008 passed by the Appellate Authority for Industrial and Financial Reconstruction, copies whereof are annexed hereto and collectively marked as Annexure E . The factum of such sale was also disclosed by the company in its Balance-sheet for the financial year ended 31st March 2007 which was duly approved by the me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2010. It is not clear as to what impelled the State to accord the benefit of the said Act of 1972 to this recalcitrant company, but one need not waste time pondering over matters that are sometime governed by political and rank extraneous considerations. What is obvious is that the company has taken recourse to the provisions of a Central Act and a State Act that have been brought in to subserve the Constitutional mandate of guarding the employment of those who most need it, only to misuse the protection accorded thereunder by stealing the company s assets and handing them on a platter to the dishonest persons in control of the company and extending the time before such matter could be complained of. There is no shred of remorse shown by the company. There is no attempt by the company to offer to cause its management to bring back the assets to the company s fold despite such enormous dissipation of assets being discovered. The only submission made by the company to show its bona fides is the token offer of paying the Sahaganj workmen their August, 2011 dues within a week. The offer is in the nature of an inducement to court to lay its hands off the company and the reprehensibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another case of an intrepid journalist s copy being sacrificed at the altar of advertisement revenue or something more sinister. CA No. 34 of 2012 is allowed by appointing the official liquidator as the provisional liquidator over and in respect of Dunlop India Limited with full powers as liquidator under the Companies Act, 1956. The provisional liquidator will take every step that is permissible to not only protect the assets and interests of the company and its creditors, employees and workmen, but will also take all steps in accordance with law to forthwith recover and arrest the further alienation of the four immovable properties that were fraudulently transferred by the company in the year 2006-07 or thereabouts as referred to above. The company will pay costs assessed that 3,000 GM to the petitioning-creditor. The company and its directors, managers and all concerned will remain obliged to forthwith ensure that all books, records, documents, assets and properties of the company are made available for the effective control, and protection thereof and of the company s interests, by the official liquidator. All decisions of the company will be subject to the approval of the offi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
