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TMI Blog2024 (7) TMI 1363X X X X Extracts X X X X X X X X Extracts X X X X ..... that the right to the shareholding of the applicant company/SJSPL did not fructify in favour of the respondent/ company (in liquidation), it is difficult to discern that there has been any lack of bonafides or diligence on the part of the applicant/SJSPL and for that matter, on the part of the Ex-directors of the company (in liquidation). It is also difficult to discern any element of collusiveness or conspiracy between the two parties, soon before or after commencement of the winding up petition vide order dated 23.02.2016. In such a scenario, there could be no two opinions but to hold that the subject property cannot be made available to the Official Liquidator for the purposes of the winding up proceedings. The benefit of vesting the subject property in favour of the company (in liquidation) so as to enhance its assets cannot be sustained. Lastly, merely because some schemes for revival of the company (in liquidation) have been proposed by the stakeholders and are pending for consideration before this Court, the same would not warrant vesting the subject property in favour of the company (in liquidation), particularly when, apart for bhumipujan at the site, no construction work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ator was appointed by this Court in terms of order dated 11.01.2017. 3. Reverting to the instant application, shorn of unnecessary details, it is the case of the applicant/SJSPL that in terms of the Lease Deed dated 27.06.2008, which was duly registered on 03.07.2008 between the applicant/company and New Okhla Industrial Development Authority (hereinafter referred as Noida Authority ), a perpetual lease was created in its favour qua the plot of land measuring 20,002.40 sq. mtrs. in Sector-154, Noida for a total consideration of Rs. 10,19,34,727/- towards the land premium calculated @ Rs. 5096/- per sq. mtr.; out of which, 30% i.e., Rs. 3,05,76,000/- had been paid by the applicant/SJSPL/ company/lessee to the lessor i.e., Noida Authority; thereby acknowledging balance payment of Rs. 7,13,44,000/- to be paid to the lessor/Noida Authority in 16 equal half-yearly installments along with interest @ 11% p.a. compounded half-yearly and payable from 27.09.2008 to 27.03.2016. The Lease Deed provided that the applicant/SJSPL/company/lessee shall complete construction and obtain occupancy certificate from the Competent Authority within 05 years from the date of actual possession and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstrained to issue a public notice in daily newspapers regarding the cancellation of the Agreement namely, ‗Hindustan Times (English and Hindi editions) dated 28.04.2016. Aggrieved thereof, the respondent company filed a petition being OMP(I) No.11/2016 in this Court inter alia seeking to restrain the applicant/company from handing over/creating third-party rights with regard to the said property inter alia admitting and acknowledging that in terms of the Agreement dated 16.04.2013, a sum of Rs. 25,07,25,400/- was due and payable to the applicant/SJSPL, along with interest @ 24% p.a. for delayed payment. It is stated that the said OMP(I) No.11/2016 was dismissed by this Court vide order dated 19.12.2016, and accordingly, the Agreement between the parties stood terminated. 7. In the aforesaid backdrop, the grievance of the applicant/SJSPL is that without any notice or information, the Official Liquidator has taken possession of the vacant land in question by deputing their own security guards at the site from an unknown date, which fact came to be known as per the Status Report dated 30.10.2019 submitted by the Official Liquidator in CO. APPL. 932/2019. It is stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alluding to the terms and conditions/covenants of the Lease Deed dated 27.06.2008 executed with Noida Authority and also the Agreement dated 16.04.2013 with M/s. Cosmic Structure Ltd., vehemently urged that it was a genuine transaction whereby the entire shareholding of the applicant/company was promised to be transferred to the respondent/company (in liquidation) much prior to the appointment of the Provisional Liquidator on 11.01.2017. The Court was taken through the OMP(I) No.11/2016 filed by the respondent/company (in liquidation) as also the order dated 19.12.2016, whereby the said petition was dismissed on account of failure on the part of the Ex-management to make complete payment of the outstanding sale consideration. 12. It was also pointed out that the breach committed by the respondent/company (in liquidation) in honouring the Agreement dated 16.04.2013, has resulted in a huge financial burden upon the applicant company inasmuch as the Noida Authority in terms of letter dated 09.10.2013, demanded payment of outstanding dues to the tune of Rs. 8,26,00,000/-, which demand was subsequently increased to Rs. 20.88 crores in terms of notice dated 24.06.2021. It is further urg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the respondent/company (in liquidation), but it was pointed out that surprisingly, the property which was valued at Rs. 32 crores, as per the valuation conducted by the office of the Official Liquidator, was agreed to be sold vide Agreement dated 16.04.2013 for a consideration in excess of Rs. 40 crores and that the Ex-management have not explained as to why the statutory dues liable to be paid to the Noida Authority had not been paid despite evidently receiving a sum of Rs. 16 crores from the respondent/company (in liquidation). It was vehemently urged that the Agreement dated 16.04.2013 is collusive in nature as it was ostensibly for the transfer/sale of shareholding, but in reality, it was for the purposes of selling the land, the vacant and physical possession of which, was transferred to the respondent/company (in liquidation) for the purposes of building a commercial project at the site and evidently bookings were accepted from the investors, raking in investments to the tune of Rs. 80 crores to Rs. 100 crores, and that the monies received have since been siphoned off by the management/Ex- directors of respondent/company (in liquidation). 16. Learned Senior Standing Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in question is allowed to go back to the applicant company, the entire project would be jeopardized. ANALYSIS AND DECISION: 20. I have given my anxious consideration to the submissions advanced by the learned counsels for the contesting parties at the Bar. I have meticulously perused the record as well. 21. First things first, it would be apposite to refer to the relevant provisions of the Companies Act, 1956 that come into consideration for adjudication of the instant application, which provides as under:- 531-A. Avoidance of voluntary transfer. Any transfer of property, movable or immovable, or any delivery of goods, made by a company, not being a transfer or delivery made in the ordinary course of its business or in favour of a purchaser or encumbrancer in good faith and for valuable consideration, if made within a period of one year before the presentation of a petition for winding up by [the Tribunal] or the passing of a resolution for voluntary winding up of the company, shall be void against the liquidator. 22. A careful perusal of the aforesaid provision would show that the transfer of an immovable property made by a company within a period of one year before the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... winding up proceedings was rejected. This Court referred with approval, the decision of the Calcutta High Court in the case of J. Sen Gupta Private Ltd. (In Liquidation) AIR 1962 Cal. 405 , which dealt with Section 536(2) of the Act and observed as under:- 12. It seems to me, therefore, upon considering various authorities on this subject that the following principles are doubtless applicable to sub-sec (2) of Sec. 536 of the Companies Act, 1956: 1. The Court has an absolute discretion to validate a transaction; and that 2. This discretion is controlled only by the general principles which apply to every kind of judicial discretion; and that . 3. The Court must have regard to all the surrounding circumstances and if from all the surrounding circumstances it comes to the conclusion that the transaction should not be void, it is within the power of the Court under Sec. 536(2) to say that the transaction is not void; and lastly that 4. If it be found that the transaction was for the benefit of and in the interests of the company or for keeping the company going or keeping things going generally, it ought to be confirmed. (Bold portions emphasized) 24. In the above-noted judgment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty belonging to the company (in liquidation) at Mumbai had been sold to one Smt. Anita Jain on the premise that the company owed certain monies to her for the promotion work done by her, vide Agreement to Sell dated 23.03.2001. It was found that the concerned Housing Society had recognized Smt. Anita Jain as the bonafide owner of the plot in question but she had also sold the said property to the appellant vide agreement to sell dated 13.12.2001. Finding that the aforesaid disposition or sale was not genuine and bonafide, it was held as under: 9. Be that as it may, we have otherwise looked into the matter. Counsel for the appellant has argued that the learned company judge erred in not considering that the appellant was a bona fide purchaser for value and in proceeding on the premise that the transaction was void merely for the reason of having been effected after the order of winding up. It is contended that it was incumbent upon the company judge to record a finding whether Smt. Anita Jain was a bona fide creditor of the company or not and that the preference shown to Smt. Anita Jain as a creditor could have been held to be bad only if found to be fraudulent and of which there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is produced about such compulsion; it was further held that the assets of the company (in liquidation) cannot be disposed of at the mere pleasure of the company and only such disposal shall be validated which is found to be for the benefit and interest of the company; it is for enabling the company to continue as a going concern and to protect the interest of the shareholders and creditors, that power of validation under section 536(2) should be exercised. We also find a Division Bench of this court to have in H.L. Seth v. Wearwell Cycle Co. (India) Ltd., [1992] 46 DLT 599, observed the test to be applied for validating a transaction in exercise of the powers under section 536(2) is of ―good faith in the ordinary course of trade, for the benefit of the company . 27. In light of the aforesaid proposition of law, reverting to the instant matter, it is brought to the fore that the applicant - M/s. Surya Jyoti Software Pvt. Ltd. had acquired the perpetual lease of the property in question from the Noida Authority in terms of the Lease Deed dated 27.06.2008 measuring 20002.40 sq. mtrs. and in terms of clause 11(A), the applicant/allottee/lessee was supposed to complete construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, invoking the arbitration clause on 25.05.2016 which came to be entertained on 30.05.2016 and eventually after notice to the parties, the same came to be disposed of by this Court vide order dated 19.12.2016. It would be apposite to reproduce the order dated 19.12.2016 for better understanding the prevailing facts and circumstances, which go as under: 1. The petitioner has filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereafter the Act ), inter alia, praying as under:- It is, therefore, respectfully prayed that the respondents may please be restrained from handing over / parting with possession of Plot No. 1 situated at Sector 154, Noida to any third party as also from doing any act in furtherance of notice of termination dated 25.02.2016 till the commencement of Arbitral proceedings with any other or further orders, relief or direction as this Hon'ble Court may deem fit and proper under the facts and circumstances of the present petition. 2. The parties had entered into an agreement dated 16.04.2013 whereby it was agreed that the entire shareholding of the of the respondent company would be transferred to the petitioner at the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interestingly, the relief sought was to the effect that the respondent company i.e., the seller/SJSPL be restrained from handing over/parting with possession of the property in question to any third-party as also doing any act in furtherance of notice of termination dated 25.02.2016 till the commencement of the arbitral proceedings. 31. Although much has been argued by the learned Senior Standing Counsel for the Official Liquidator as also learned counsels for the Investor Association besides Ex-director/Mr. Nishant Muttreja, that the sale itself was in violation of the terms and conditions of the initial perpetual Lease Deed dated 27.06.2008, such contentions do not cut any ice. Evidently, the sale of the shareholding of M/s. SJSPL was permissible under law. At this stage, it would be expedient to refer to the relevant covenants on the perpetual Lease Deed. It would also be appropriate to extract the relevant recitals of the Agreement dated 16.04.2013, which read as under: 5. The lessee shall be liable to pay all the rates local taxes charges and assessment by whatever name called of every description in respect of the demised plot/or building constructed thereon assessed or impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding / funetioning of the institution subject to such charges terms and conditions as decided by the lessor at the time of granting the permission the first charges shall be of the lessor on the property. Provided that in the event of the sale or foreclosure of the mortgaged or charged property the lessor shall be entitled to claim and recover such percentage as decided by the lessor of the unearned increases in the value of the demised plot as aforesaid and the amount of the lessor share of the said unearned increase shail be first charges in the favour of the lessor and having priority over the said mortgage or charge. The decision of the lessor in respect of the market value of the said land shall be final and binding on the lessee. Provided further that the lessor shall have the pre-emptive right to purchase the mortgaged or charged property after deducting such percentage as decided by the lessor of unearned increase as aforesaid. The lessor right to the recovery of the unearned increase and the pre-emptive right to purchase the property as mentioned herein before shall apply equally to insolvent sale or transfer it by or through execution of decree of insolvency by the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e part of the applicant/SJSPL in asserting its legal rights and thereby seeking to rescind the Agreement dated 16.04.2013, for which recourse was taken. It initially served a notice dated 25.02.2016, besides bringing the general public to notice, by way of leading publications in daily newspapers on 28.04.2016, resulting in filing of the petition by the respondent company (till then not in liquidation) under Section 9 of the Arbitration Conciliation Act, which eventually came to be dismissed by this Court vide order dated 19.12.2016. 34. There is in fact another side to the story that cannot be overlooked, to the effect that due to the alleged breaches committed by the respondent/company (in liquidation), the applicant/SJSPL became vested with a heavy financial burden towards the Noida Authority, which is presently standing to the tune of Rs. 23 crores. Said burden has been assailed before the Supreme Court in SLP(C) No. 4283/2020 and in terms of orders dated 17.02.2020, 24.02.2020, 05.06.2020 and 04.09.2020, it appears that a sum of Rs. 2.5 crores already stands deposited by SJSPL, before the Court. 35. In the aforesaid backdrop, what emerges is that the applicant has been diligen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties to the present application that booking amounts totaling to a sum of over Rs. 100 crores had been generated by the company (in liquidation) as against the property in question. However, there is not an iota of evidence suggesting that any of the funds were siphoned off or that there was some collusive foul play between the management of the applicant/SJSPL and the respondent company or that the applicant was the beneficiary of any unjust enrichment. 36. To sum up, the manner in which the sale agreement dated 16.04.2013 was executed, towards the transfer of shareholding of SJSPL, as also the pattern of payments pursuant to the same, which events took place prior to the winding up petition being entertained by this Court, raise an inference that such disposition had been done in the ordinary course of business. The transfer of shareholding was a purely commercial decision taken in the ordinary course of business and was obviously based on certain conditions prevailing in the real estate market. The management of SJSPL pursued its remedies against the respondent company in good faith, in the process laying claim over the subject property subsequent to the adverse action taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne-Time Settlement ( OTS ). However, such an effort did not prove fruitful and failed to fructify into any settlement. In terms of the OTS submitted by the applicant with the Official Liquidator, out of the total amount of Rs. 16.40 crores, Rs. 3.45 crores had been deposited with the Noida Authority on account of interest and 20% of the total consideration for forfeiture vide clause (12) of the agreement came to be Rs. 8.96 crores. Although, there remains a balance of Rs. 3.98 crores, it has been urged that total loss to the company for non- performance of the agreement is to the tune of Rs. 18.46 crores. Further, as per the OTS, the applicant company was to undertake to clear all the pending dues towards the security agency that has been deputed for the purpose of safeguarding and protecting the subject property during this period. 39. In view of the foregoing discussion, the instant application moved by the applicant-SJSPL is hereby allowed and the Official Liquidator is directed to de-seal the subject property viz. Plot No.1, Sector 154, Noida- 201301 and hand over its peaceful and vacant possession to the applicant-company. 40. However, this shall be subject to the applicant-co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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