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TMI Blog2023 (6) TMI 1452X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt till the outstanding dues were squared-up - the manner in which the City Civil Court approached the issue deserves consideration. The learned Judge, City Civil Court, records that bills were raised on behalf of defendant No.4 under different heads i.e. property taxes/repair cess/rent. It was the responsibility of defendant No.1 to ensure that the statutory dues were deposited preferentially. The Court further noted that the direction for opening a separate bank account were not complied with by the defendants till 1st February, 2019, as noted in the order of NCLT. It went on to record that defendant No.1 did not faithfully disclose as to whether the directions of the NCLT were complied with. The very raison d etre of the directions of the NCLT was to ensure that the amount received from the tenants towards rent, charges and cess was primarily appropriated toward the outstanding property dues. NCLT went on to provide that the outstanding property tax dues would constitute a first charge on the said receipts. The situation is accentuated by the fact that the amounts were collected from the tenants under different heads including property taxes and repair cess. If that was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt No.4 M/s. Maneklal. (b) In the wake of dispute between the plaintiff and defendant Nos.1 and 2, the plaintiff alleges, defendant No.1, in a meeting held on 22nd November, 2013, without requisite coram, removed the plaintiff and defendant No.3, who came to be subsequently deleted, from the post of the Directors of defendant No.4 Company and instead appointed defendant No.2 as an Additional Director of defendant No.4 Company. The plaintiff thus instituted Suit No.4321 of 2013 challenging, inter alia , his alleged illegal removal from the directorship of defendant No.4 Company, and also to protect the financial assets of defendant No.4 from being siphoned off by defendant Nos.1 and 2. (c) In Suit No.4231 of 2013, the plaintiff took out a Notice of Motion No.272 of 2014 seeking interim and ad-interim reliefs. As the ad-interim reliefs, by an order dated 3rd December, 2013, were not granted, to the extent sought, the plaintiff preferred Appeal from Order No.1375 of 2013. By an order dated 20th December, 2013, this Court was persuaded to grant ad-interim relief in terms of prayer Clause f(i) of the Civil Application No.1638 of 2013 taken out in the said appeal, thereby restraining def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March, 2017 was passed permitting defendant No.4 Company to liquidate the investment, the order dated 20th December, 2013 was not shown to the learned Judge. After considering the material tendered on behalf of the parties and the submissions canvassed, the learned Single Judge was persuaded to hold that there was no such change in circumstances as to warrant a variation or modification of the order dated 20th December, 2013 passed in Appeal from Order No.1375 of 2013 and thus the Notice of Motion to the extent of the prayer for liquidation of the assets of the Company to pay the statutory dues, came to be dismissed with costs. (j) The aforesaid order was carried in appeal by defendant No.1 in Appeal No.234 of 2018. By an order dated 26th September, 2018 the Appeal Bench dismissed the appeal. The Appeal Bench, inter alia, observed that the learned Single Judge could not have, even otherwise, modified the order dated 20th December, 2013 passed in an independent proceedings (Appeal from Order No.1375 of 2013) by passing an interim order in Suit No.2546 of 2012 and that too after an unsuccessful attempt was made by defendant No.1 to get the order dated 20th December, 2013 modified and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de Notice of Motion No.1182 of 2019 on its own merits. (n) In the meanwhile, National Company Law Tribunal ( NCLT ) on an application of the petitioners in Company Petition, namely M/s. Suyash Traders, being application No.433 of 2018, (wherein allegations were made that respondent Nos.2 and 3 therein - defendant Nos.1 and 2 herein were illegally controlling the management of defendant No.4 Company and had siphoned off the funds resulting in the property taxes remaining outstanding) by an order dated 17th May, 2018, directed the petitioners and the respondents in the said petition, excluding respondent No.1 Company, to contribute Rs. 5,00,000/- for making immediate payment to the MCGM. It was, inter alia , directed that defendant No.4 Company shall open a separate bank account, in the nature of escrow, in which the total rent, property tax, repair cess and any other amount collected should be deposited thenceforth and withdrawal should be made only upon obtaining the permission and subject to the satisfaction of the NCLT and the first charge over the amounts so collected shall be of MCGM till the outstanding dues were squared-up. (o) In the backdrop of the aforesaid proceedings and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e length. The learned Counsel took the Court through the relevant pleadings and the various orders referred to above. 6. Mr. Naik, the learned Senior Advocate for the Appellant, submitted that the learned Judge, City Civil Court, completely misdirected himself in permitting the liquidation of the fixed deposits of defendant No.4 in the face of the restraint ordered by this Court by order dated 20th December, 2013 and that too without any justification. Mr. Naik urged with tenacity that despite having noted that defendant Nos.1 and 2 were in breach of the order of NCLT to deposit the amount received towards rent, property taxes, repair cess in a separate account, which was directed to be opened, could not have lent assistance in liquidating the fixed deposit. Mr. Naik strenuously submitted that having noted, more than once, that the defendant Nos.1 and 2 were guilty of breach of the order of NCLT, the learned Judge fell in error in granting the relief on the premise that the estate of company was required to preserved irrespective of the question as to who was at fault. Such approach vitiated the impugned order. 7. Mr. Naik would further urge that while granting an equitable relief, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction, as the learned Judge, City Civil Court, has imposed conditions which, on the one hand, incorporate a fail-safe mechanism and, on the other hand, protect the interest of both sides, urged Mr. Bhole. 12. To draw home the point that the expenses of the operations of Manek Mahal far exceed the income, Mr. Bhole took the Court through the documents especially the statements of accounts. The allegation of misappropriation or breach of trust was thus stated to be wholly unsubstantiated. 13. Manek Mahal is indisputably a completely tenanted property. The income of defendant No.4 primarily and pre-dominently consists of the rent, charges and cess received from the tenants. Evidently, defendant Nos.1 and 2 have been at the helm of affairs of defendant No.4 since the alleged ouster of the plaintiff in the year 2013. Equally, indisputable is the fact that the arrears of the property taxes have accumulated over a period of time, with a fair share of interest and penalty for delayed payment. When the order was passed in Notice of Motion No.1551 of 2016 in Suit No.2546 of 2012 the property taxes and repair cess to the tune of Rs. 52,71,997/- were due. In the instant Notice of Motion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondents, barring Company the (Respondent No.1) shall contribute Rs. 5,00,000/-, thus totalling Rs. 10,00,000/- (ten lakhs) immediately within 24 hours without fail to make the payment to MCGM. Being aware of the fact that the parties are contesting over the rights in the Company hence it is hereby made explicit that the contribution as directed shall not create any right of any nature to either side in the Company M/s. Maniklal Enterprises. The fate of this contribution shall depend upon the outcome of the main petition. (ii) The management of the Company shall move an application to the authorities of MCGM to grant installment for rest of the outstanding property tax. An undertaking on oath by filing an Affidavit be submitted to MCGM by the present Management. Hopefully the Ld. Authorities of MCGM shall consider the proposal judiciously and also favorable. . (iv) That henceforth the first charge over the collection shall be of MCGM till the outstanding due is squared-up. .. 18. Having found that the income of defendant No.4 was not appropriated towards the discharge of statutory dues, in priority, defendant No.4 was directed to open a separate bank account and the total r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... break the fixed deposit for payment of statutory dues. This cannot be the ground but at the same time when the court is required to balance the equity, it has to consider that the main source of the income of the company i.e. Manek Mahal building is required to be preserved. The liquid assets are of the company required to be utilized for the purpose of preserving the property of the company which is in the larger interest of the company. As the defendant No.1 has not given the details of the act done in pursuance of the order of NCLT, therefore some conditions are required to be put to make up the liquid assets of the company utilized for the purpose of payment of statutory dues. Hence, in order to save the asset of the company from coercive action of the MCGM which is in the larger interest of the company, the notice of motion is required to be considered. 21. In the context of the aforesaid observations Mr. Naik urged, with a degree of vehemence, that the impugned order puts premium on the wrongful act of defendant Nos.1 and 2 in non-compliance of the directions of NCLT. Not only there was default in opening a separate account and crediting the amount therein but also in furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No.4 faces is brought about by the conduct of defendant Nos.1 and 2. Such conduct must enter the judicious determination while considering the grant of an equitable relief at an interim stage. In the case of Gujarat Bottling (supra), the Supreme Court enunciated that while considering the grant of an equitable injunctive relief the Court should apart from other considerations also look to the conduct of the party invoking the jurisdiction of the Court and refuse to interfere unless the conduct was unblemished. Observations of the Court in paragraphs 47 and 49 are material and hence extracted below. 47. In this context, it would be relevant to mention that in the instant case GBC had approached the High Court for the injunction order, granted earlier, to be vacated. Under Order 39 of the Code of Civil Procedure, jurisdiction of the Court to interfere with an order of interlocutory or temporary injunction is purely equitable and, therefore, the Court, on being approached, will apart form other considerations, also look to the conduct of the party invoking the jurisdiction of the Court, and may refuse to interfere unless his conduct was fre from blame. Since the relief is wholly equ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (60,94,934+12,15,456 = 73,10,390) 59,12,701.00 2021 22 (62,04,164+11,07,690=73,11,854) 63,43,245.00 Trade Receivables till date 1,58,51,351.00 28. I have perused the audited balance-sheets. The revenue from operations were Rs. 40,38,624/-, Rs. 41,82,110/-, Rs. 60,94,934/- and Rs. 62,04,164/- for the year ending 31st March, 2019, 2020, 2021 and 2022, respectively. In the break- up of the receipts, under caption note forming an integral part of the statements of profit and loss account , the receipts are further divided into compensation and service charges, general maintenance charges, furniture hire charges and other related charges. 29. In the face of the aforesaid statements of account, it can hardly be contested that there were receipts under the heads which were directed to be deposited in a separate account by NCLT for being appropriated towards the discharge of the tax liability, though what was the exact amount received under the heads rent/property taxes/repair cess, is not clearly discernible. 30. It would be contextually relevant to note that the table appended below paragraph 35(e) of the affidavit-in-reply of respondent No.1 shows that sums of Rs. 1,16,86,036.55, Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l drastic consequences qua the asset of defendant No.4. 35. Undoubtedly the property tax liability deserves to be discharged and, if need to be, the liquid assets of defendant No.4 ought to be utilized for payment of property taxes to obviate drastic consequences. However, defendant Nos.1 and 2, who have violated the order of NCLT and appropriated the amounts to other purposes must be put to terms. 36. So far as the default in remittance of the property taxes and repair cess collected from the tenants, to MCGM, there can be no justification. Therefore, defendant Nos.1 and 2 must bring back the entire amount which has been collected from the tenants under the head of property tax and repair cess from the date of the order of NCLT. As regards the amount collected form the tenants towards the rent and appropriated by defendant Nos.1 and 2 in breach of NCLT order, in my view, defendant Nos.1 and 2 deserve to be directed to bring back 25% of the total rent collected from the date of the order of NCLT. In case, even after defendant Nos.1 and 2 bring back the aforesaid amount there remains shortfall to clear the tax liability, the fixed deposits of defendant No.4 can be liquidated and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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