Patna High Court - Orders
Braj Kishore Srivastava vs Standard Saving & Invest.Co.Lt on 15 May, 2014
Author: Ramesh Kumar Datta
Bench: Ramesh Kumar Datta
IN THE HIGH COURT OF JUDICATURE AT PATNA
Company Petition No.11 of 1998
======================================================
In the matter of Standard Saving & Investment .Co.Ltd.
(In Liquidation)
======================================================
CORAM: HONOURABLE MR. JUSTICE RAMESH KUMAR DATTA
104 15.05.2014Re: H.C. Building matter:
The present matter under Section 531A of the Companies Act has arisen out of the report dated 9.7.2007 and OLR No. 48/2010 filed by the Official Liquidator by which a prayer has been made to hold that the sale of Schedule property by the company (in liquidation) in favour of M/s. Vridhishree Hotels Limited is void under Section 531A of the Companies Act, 1956 and consequentially the sale deeds executed in favour of the purchasers be annulled with a direction to hand over possession of the property.
In the said reports it is pointed out by the Official Liquidator that the Company (in liquidation) was incorporated on 28.5.1996 as a Public Company Limited by shares with the objects to carry on the business of investors by selling and purchasing business, as such property, building, land, etc., was also one object for which the company was established. On 26.8.1998 one of its Executive and creditor presented the winding up petition. The petition was finally advertised and published in Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 2/47 two local dailies and winding up order was passed on 21.5.2004 appointing the Official Liquidator. The winding up order casts a mandatory duty on him to take into custody or under his control all the properties, effects and actionable claims to which the company (in liquidation) is or appears to be entitled under Section 456 of the Companies Act, 1956.
It may here be mentioned that on 20.11.1998 this Court while issuing notice in both the company petition as well as interlocutory application being I.A. No. 13256/1998 to the respondents to show cause why an order of winding up and/or any other appropriate order on the petition/application be not made by this Court, further directed that in the meantime, the Directors of the Company, namely, respondent nos. 2 to 4 are restrained from disposing of the property of the company by sale or otherwise and from withdrawing money from the account of the company.
In his report the O.L. further points out that the company (in liquidation) had purchased the property, land with building known as H.C. Building situated at Exhibition Road, in the town and district of Patna from Shri Baldeo Krishna Logani, Shri Jagdish Chandra Logani and Nirmal Rani Logani who were the joint owners of the said building by three different registered Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 3/47 sale deeds dated 17.7.1996 registered at the office of the Sub- Registrar of Assurances, Kolkata bearing registration Nos. 10470 dated 22.7.1996, 10476 dated 24.7.1996 and 10126 dated 27.7.1996. Since the Government of Bihar by enactment decided not to grant recognition to any sale deeds registered outside the State of Bihar with regard to any immovable properties situated within the State unless the purchaser of such sale deeds pay appropriate fee and stamp duty in accordance with the rules framed by the Government of Bihar, the Patna Municipal Corporation has not entered the name of the company ( in liquidation) as owner of the H.C. Building but only as occupier of the said building.
It is further pointed out in the Reports that the Board of Directors of the company (in liquidation) by its resolution dated 1.12.1997 resolved to sell the said building premises for the purpose of payments to investors on the maturity of their investments and one M/s. Vridhishree Hotels Limited had made offer to purchase the said building premises which offer was accepted by the Board of Directors by its resolution dated 20.12.1997. Thereafter an agreement for sale dated 23.12.1997 was entered into. It may here be pointed out that the agreement for sale provided for sale of the H.C. building with all furniture Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 4/47 and fixtures for a consideration of Rs. 50 lacs. It was stated in the said agreement for sale that an amount of Rs. 5 lacs has been paid but the mode of payment either by Cheque or Demand Draft or cash is not mentioned in the said agreement for sale. It was further stated that the company (in liquidation) in part performance of agreement for sale delivered possession of the building premises to M/s. Vridhishree Hotels Limited on 23.12.2007 which was allowed permissive possession till the execution and registration of the sale deeds. It is also stated that the purchaser had released a public notice in the local daily "Times of India" published from Patna on 22.1.1998 inviting objection, if any, from the public at large or the investors of the vendor company (in liquidation) in regard to purchase of the said building premises and whatever objections were received, had been taken care of and none of the objectors taken any action restraining the company (in liquidation) to complete the formalities of sale. Thereafter the company (in liquidation) transferred the said H.C. building including the land covered by building and surrounding it and its fixtures, fittings and furniture and stock in trade as existing on the date through four registered sale deeds for a total sale consideration of Rs. 19,93,000/- as also an agreement for sale of furniture, fixture and stocks in trade Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 5/47 dated 24.8.1998 for a sale consideration of Rs. 8,00,000/-. The details of the registered sale deeds have been stated as follows:-
(i) Basement Sale Deed dated 24th day of August 1998 was lodged for registration on 08.10.1998 with the office of Sub-
Registrar of Assurances, Mumbai bearing Registration No. R-3-BBB-
2103/98 for sale consideration of Rs. 4,98,000/-. However, the Vendor could not admit the execution of the documents before the Sub-Registrar on 08.10.1998 and the same was confirmed on 06.05.1999 vide "Deed of Declaration-cum-Confirmation".
(ii) Ground Floor Sale Deed dated 24th day of August 1998 for a sale consideration of Rs.
4,99,000/-
(iii) First Floor Sale Deed dated 24th day of August 1998 for a sale consideration of Rs.
4,00,000/-
(iv) Roof/Terrace Sale Deed dated 24th day of August Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 6/47 1998 was lodged for registration on 09.10.1998 with the office of Sub-
Registrar of Assurances, Mumbai bearing Registration No. R-3-BBB-
2120/1998 for sale consideration of Rs. 4,97,000/-. However, the Vendor could not admit the execution of the documents before the Sub-Registrar on 09.10.1998 and the same was confirmed on 6th day of May 1999 vide "Deed of Declaration-cum-Confirmation".
(v) Furniture & Agreement for sale for the purchase Fixture of furniture, Fixture and stocks in trade, dated 24.08.1998, for the sale consideration of Rs. 8,00,000/-.
The purchaser company claims to have paid a total sale consideration amount of Rs. 27,93,000/- out of which Rs. 4,51,000/- is claimed to have been paid by Demand Draft, Rs. 15,00,000/- by Cheque and Rs. 8,42,000/- by cash.
It is also reported that Patna Municipal Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 7/47 Corporation has entered the name of the vendee as occupier of the said building premises by order dated 27.6.2002 passed in Mutation Case No. 114/2002-03.
It was further pointed out in the report that Shri Sunil Kumar Sinha, Ex-managing Director of the Company (in liquidation) in his affidavits filed twice at flags 19 dated 21.8.2006 and at flag-24 sworn on 12.4.2007 had made statements on oath that the H.C. building belongs to the company (in liquidation) furnishing a copy of the sale deed by which the same had been purchased but had never disclosed on any occasion that the company (in liquidation) had transferred the building premises to M/s. Vridhishree Hotels Ltd. for reasons best known to him.
It is further asserted that under Section 531-A of the Companies Act any transfer of the property, movable or immovable made by a company (in liquidation) not being transfer made in the ordinary course of its business or in good faith and for valuable consideration, if made within a period of one year before the presentation of a petition for winding up, shall be void against the liquidator under Section 531-A of the Companies Act.
It was, accordingly, the stand of the O.L. in the said Reports that on the basis of materials placed on the record by Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 8/47 the purchaser and from the other averments made in the reports it was evident that the property has not been sold bona fide and in good faith and in the interest of the transferor company and therefore, this Court may please declare that the property in question which is situated at the prime location has not been sold bonafidely in good faith and amount mentioned in the sale deed do not reflect the fair market price and the transactions has been entered into with a view to defeat the claim of the creditors and in preference to a set of persons and to enable the Directors in management to encash the benefit for themselves and thereby hold that the sale of the Schedule property in favour of M/s. Vridhishree Hotels Ltd. was void under Section 531-A of the Companies Act, 1956 and consequentially the sale deeds executed in favour of the purchaser be annulled with direction to him to hand over peaceful possession.
The stand of the purchaser M/s. Vridhishree Hotels Ltd. as stated in as many as seven affidavits sworn from 11.9.2008 till 27.10.2010by its Managing Director, has been shifting from time to time with marked developments and additions apart from what it had reported to the O.L. which was reproduced by the O.L. in his first report dated 9.7.2007 at flag-
25. It was pleaded that the Ex-Managing Director of the company Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 9/47 in his affidavits at flags 19 and 24 furnished the details of the property belonging to the company but on both occasions Sri Sunil Kumar Sinha, Ex-managing Director of the company (in liquidation) had made statement on oath that H.C. Hotel building belongs to the company and is in the possession of trespassers and strangely never disclosed on any occasion that he has already transferred the building premises surrounding along with fixture and furniture to M/s.Vridhishree Hotels Ltd. for reasons best known to him. The whole transaction of the vendor company regarding H.C. Building was as per the resolution of the Board of Directors of the company dated 1.12.1997, therefore, the entire transaction was made in the ordinary course of business and in good faith and for valuable consideration and such transfer cannot be annulled under Section 531A of the Act. It was further asserted that the burden of proof is entirely on the Official Liquidator or the person who has impugned the transaction of transfer.
Thereafter in the fourth affidavit, filed on 16.10.2009 on behalf of the purchaser-company, it was asserted that the said company had purchased the immovable and movable properties of H.C. building, Exhibition Road, Patna by registered sale deeds for a consideration amount of Rs. 27.93 lacs with Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 10/47 respect to which four registered sale deeds for immovable property had been executed for an amount of Rs. 19.93 lacs as also an agreement for sale of movables of H.C. Building for Rs. 8 lacs. The details of the modes of payment were again given which shows that the total amount paid in cash was Rs. 8,42,000.00, by Demand Draft Rs. 4,51,000.00 and by cheque Rs. 11,50,000.00. It was further stated therein that cash receipts were available only for Rs. 7.65,000.00 and six such receipts were annexed. It is further stated that amount paid by Demand Draft mentioned in the sale deeds comes to Rs. 8,01,000.00. It is admitted that out of total cheque amounts of Rs. 11,50,000/- for an amount of Rs. 2,50,000/- the cheques were honoured and balance of Rs.9 lacs the cheques were replaced by Demand Draft of Rs. 7.93 lacs and cash of Rs. 1,07,000/- was paid. It is further asserted that only after paying the entire amount the sale deeds were executed and registered and full and final payments were acknowledged and the deed signed.
In the meantime, on questions having been raised by the Ex-Managing Director in his reply and objections regarding the report of the O.L. as also the replies filed by the Managing Director of M/s. Vridhishree Hotels Ltd. that the agreement for sale was for a total amount of Rs. 50/- lacs but the Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 11/47 sale deeds were registered on receipt of Rs. 27.93 lacs only which amounts were also not paid as most of the cheques were dishonoured another affidavit that is, the 5th affidavit was filed on behalf of M/s. Vridhishree Hotels Ltd. in which a new story was narrated that when the purchaser after the agreement for sale on 23.12.1997 went to take delivery of possession of the building along with Mr. Sunil Kumar Sinha, Ex-Managing Director of the company (in liquidation) he had to face strong resistance from one Lalbabu Yadav and his son Dependra Kumar Yadav, resident of Goria Toli, Patna who claimed to have paid Rs. 18/- lacs to Mr. Sunil Kumar Sinha for purchase of H.C. building which fact was not denied by Mr. Sunil Kumar Sinha and in such a situation those two persons insisted for refund of their advance money and forcibly carried away Sunil Kumar Sinha with them in order to realize their money. Thereafter a letter dated 7.5.1998 was received from Sunil Kumar Sinha requesting him to refund Rs. 18/- lacs to Mr. Dependra Kumar, S/o Lal Babu Yadav, Goriya Toli, Patna by way of refund of the amount taken from them by Sunil Kumar Sinha. Mr. Sunil Kumar Sinha in the said letter had expressed his agreement to adjust this sum of Rs. 18/- lacs from the account (sale price of Rs. 50 lacs of the H.C. building). The letter dated 7.5.1998 was also brought on the record for the first Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 12/47 time.
It is further stated that accepting the words of the Ex-Managing Director, an amount of Rs. 18/- lacs was paid to Lalbabu Yadav and his son Dependra Kumar and further two lacs by way of interest was also paid to Lalbabu Yadav for which request was made on telephone and total Rs. 20/- lacs was paid to Lalbabu Yadav on the instruction of Sunil Kumar Sinha and after the payment to Lal Babu Yadav and Dependra Yadav which had been acknowledged by them, Mr. Sunil Kumar Sinha, executed the receipt of full and final payment in May, 1999. Four receipts granted by Lal Babu Yadav have been annexed which are however for a total amount of Rs. 10.75 lacs only. After the new enactment that has come forward, by letter dated 28.4.1998 Mr. Sunil Kumar Sinha had agreed to adjust "State Registration Charges (difference in Registration charges of Kolkata and Bihar) in the consideration amount in view of the original sale deeds of H.C. building having registered at Kolkata, since the said amount had to be paid by the purchaser at the time of its mutation in Bihar and thus two lacs was accordingly adjusted. It is also stated that the purchaser had insisted that the entire consideration amount of Rs. 50/- lacs be mentioned in the sale deed but Sunil Kumar Sinha insisted for execution of four sale Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 13/47 deeds each having less than Rs. 5 lacs value in order to evade his income tax liabilities and thus four sale deeds showing valuation of Rs. 27.93 lacs were registered.
In the next affidavit filed on 8.10.2010 the purchaser again came out with a further story that, as a matter of fact, in October/November, 1996 he came to know that the company is interested to sell the H.C. Building to meet its liabilities and approached Mr. Sunil Kumar Sinha for purchasing the same. After a number of meetings in mid January, 1997 Mr. S.K.Sinha agreed to sell the said building on payment of Rs. 50/- lacs. It is stated that the official valuation of the land for execution of sale deed at that time was Rs. 1,28,700/- per decimal and the land being 3 kathas 17 dhoors, i.e., 11.7 decimals bearing Plot Nos. 782, 783 and 784 Ph-2(part) sheet no. 31, holding no. 397m (old) present holding no. 705, ward no. 2, circle no. 6, the total value of it comes to Rs. 15,44,400/-.It is stated that at this stage the purchaser paid Rs.1,30,000/- as an advance in token as proof of agreement and requested to bring the resolution of the company for selling the said property so that he may be able to pay the remaining amount and get the deed of agreement executed as early as possible. After receiving the Board of Directors resolution dated 1.12.1997, including the further Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 14/47 amounts which had been paid in the meantime and an amount of Rs. 1,01,000/-was paid by draft the agreement for sale was signed incorporating the payment of Rs. 5 lacs till the date of such signing. After entering into the agreement for sale and after taking peaceful possession of the building the deponent published a notice in the Patna edition of „The Times of India‟ dated 22.1.1998 seeking objections of any person. It is thereafter stated that after publication of the said notice, one Lalbabu Yadav with his son Dependra Kumar Yadav came to the office of the deponent and informed that when he had already made advance of Rs. 18 lacs to Mr. Sunil Kumar Sinha on 1.7.1997 for purchase of the said building then how the company of the deponent has entered into agreement with the said investment company for purchasing the said building and how the company of deponent has taken possession of the said H.C. building. It was stated by the purchaser that after signing of the agreement on 23.12.1997 possession had been handed over on the same day. Thereafter the matter being referred to Mr. S.K.Sinha, finally said Lalbabu approached the purchaser with a letter dated 7.5.1998 of Sunil Kumar Sinha to refund Rs. 18 lacs to Mr. Dependra Kumar Yadav, S/o Lalbabu Yadav and adjust the same against the payment of his company. Thereafter on confirmation from Mr. Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 15/47 S.K.Sinha regarding the letter dated 28.4.1998 and 7.5.1998 the purchaser paid Rs. 18 lacs to Mr. Lalbabu Yadav and his son Deependra Kumar Yadav in installments.
It is further stated that four sale deeds were prepared at Bombay and after great persuasion Mr.Sinha put his signature on the said four sale deeds and all the sale deeds were submitted for registration on 24.8.1998 after payment of proper stamp duty at Bombay but Mr. Sinha presented himself before the Registrar of Registration for two documents only on 24.8.1998 and refused to appear for registration of remaining two sale deeds on the pretext that he will complete the execution before the Registrar only when remaining part of payment of Lalbabu Yadav will be made. Thereafter as soon as possible after making final payment of Rs. 18 lacs, the deponent requested Mr. Lalbabu Yadav and his son to inform Mr. Sinha about the payment but after receipt of Rs. 18/- lacs the said Lalbabu Yadav and his son demanded Rs. 2 lacs were from him as interest upon which Mr. Sinha requested by his letter dated 10.4.1999 that Lalbabu Yadav and his son should be paid Rs. 18 lacs only and thereafter on being satisfied that Rs. 18 lacs had been paid to them, Mr. Sinha appeared on 6.5.1999 and confirmed the execution of remaining two sale deeds.
Patna High Court COM PET No.11 of 1998 (104) dt.15-05-201416/47
It is further stated that although the whole consideration money was paid to the Ex-Managing Director or his nominees, but he developed an evil eye on the properties in order to obtain benefit of the said properties, and instructed one of his employees to file a petition for winding up and on his instruction Shri Brij Kishore Srivastava had filed the company petition The stand of the Ex-Managing Director apart from his initial stand in his affidavits that the H.C. building was in possession of the trespassers, has been that the company (in liquidation) delivered possession of the premises to M/s. Vridhishree Hotels Ltd on 23.12.1997. He has denied the statement that the purchaser-company had paid Rs. 4,51,000/- by demand draft stating that Rs. 1,51,000/- was paid in cash and Rs. 3,00,000/- through cheque which stood dishonoured on presentation. It is further stated that the purchaser company handed over 3 cheques to the company (in liquidation), each amounting to Rs. 3,00,000/-, all of which stood dishonoured and no subsequent payment against those cheques were made by the purchaser‟s company. It is further stated that after execution of the agreement for sale, an amount of Rs. 10,00,000/-was paid but on 6.5.1998 the Managing Director of Vridhishree Hotels Ltd. Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 17/47 took back the demand drafts and one cheque totaling to Rs. 10,00,000/- stating that he was not interested in the purchase and he also retained all the original papers of H.C. building with a promise that he will return the documents after receiving full amount paid by him. Thereafter Mr. A.K.Srivastava, Managing Director of Vreedhishri Hotels Ltd. compelled the deponent to execute the sale deed in favour of the M/s. Vreedhishri Hotels Ltd. and under compulsion he executed the sale deeds on 24.8.1998. It is stated that thereupon Mr. A.K.Srivastava handed over three cheques amounting to Rs. 9 lacs but all the cheques stood dishonoured on presentation and despite several requests to make payments the payments were not made and having broken up financially and mentally he could not take legal action against Shri A.K.Srivastava and Vreedhishri Hotels Ltd. It was accordingly, prayed by him that the sale deeds dated 24.5.1998 be declared as void.
In his further affidavit, the Ex-Managing Director has reiterated his earlier stand and further submitted that an agreement dated 20.8.1999 produced by the purchaser does not bear his correct signature. It is also submitted that the fact regarding dishonour of the cheques in question have not been refuted in the different replies filed by the purchaser and that the Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 18/47 sale deed is fit to be declared void.
In the further affidavits replying to the purchasers affidavit it is stated that an attempt was made by the purchaser to justify that an amount of Rs. 9 lacs was compensated further by payment of Rs. 7.93 lacs through Demand Drafts and rest through cash but in the details given in the affidavit of the purchaser the said figures are not appearing. It is reiterated that the purchaser had not even paid Rs. 27.93 lacs what to say Rs. 50/- lacs.
In his last affidavit sworn on 17.2.2010 again a denial of the payments and dishonour of the cheques have been reiterated and the agreement dated 10.5.1999 has been alleged to be a manufactured document and not bearing correct signature of the deponent stating that he had not even met Mr. A.K.Srivastava in the year 1999 and therefore the question of entering into agreement on 10.5.1999 does not arise. The statements made by Sri A.K.Srivastava regarding Lalbabu Yadav and his son have been denied although it is stated that the Ex-Managing Director had some negotiation with Dependra Kumar S/o Lalbabu Yadav for sale/purchase of the H.C. Building and when he refused to purchase then only he negotiated with Sri A.K.Srivastava and if there would have been any wrong he would not have disclosed Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 19/47 the same to Mr. A.K.Srivastava. It is stated that Mr. A.K.Srivastava fraudulently and illegally wants to grab the H.C. Building and as per his own showing and as per Annexure-G he gave Rs. 10.75 lacs to Lalbabu Yadav whereas he claims to have paid Rs. 20/- lacs to said Lalbabu Yadav and is thus playing a fraud upon this Court after earlier having played fraud upon the deponent and reiterated non-receipt of Rs. 27.93 lacs what to say of Rs. 50/- lacs.
On the basis of the facts and pleadings of the parties, learned counsel for the purchaser submits that M/s. Vreedhishri Hotels Ltd. had purchased the H.C. building bona fide and has not connived with the company (in liquidation). It is submitted that after 22.1.1997 the purchaser waited for nearly a year before entering into the agreement for sale. It is also submitted that the O.L. has alleged that the transferor and transferee have common intention to defraud the creditors but the purchaser had not done so. On the basis of the resolution of the Board of Directors they entered into the agreement. Reliance is placed upon the affidavit of the ex-Managing Director of the company (in liquidation) that the entire amounts had been received. It is stated that the purchaser is in possession since 1997 and no one has come forward to challenge the said Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 20/47 possession.
Learned counsel further submits that the execution of sale deed has not been denied by the Ex-Managing Director. It is further submitted that the mutation has also not been opposed by the Ex-Managing Director which shows that there has been full and final payment. It is urged that in the said circumstances, the presumption would be that the entire payments have been made. In support of his stand learned counsel relies upon a decision of a learned single Judge of Gujarat High Court in the case of O.L. of Trimline Health and Research Ltd. Vs. G.S.F.C. and others : (2010) 154 Company Cases 480 (Guj) in para - 19 of which it has been held as follows:
"19. The purpose of the section is to preserve the assets of the company and to enable the company to carry out the transactions that might be for the benefit of those interested in the assets of the company. The substance of the section is that any transfer of property or goods made by a company otherwise than in the ordinary course of business, will be void, if it had been made within one year from the presentation of a winding up petition or the passing of a resolution for voluntary winding up. Section 531A has put the initial burden upon the one who wants to avoid the transaction to establish that the transaction was not made in the ordinary course of business or that it lacked good faith. It is only when this initial onus is discharged that it will shift to the official liquidator. An application Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 21/47 under this section for setting aside a transfer can be allowed where either it is proved that there was no consideration for the transaction or that the consideration was so inadequate as to raise a presumption of want of good faith. Even if there was a valuable consideration, the liquidator may show want of good faith in the sense that the transferee entered into the transaction with the knowledge of all the circumstances with a view to shield the assets against the claims of the creditors. Where a transaction is sought to be annulled under this provision, the burden of proof is on the official liquidator or the person who impugns the transaction of transfer. If the court comes to the conclusion that such transfer though made within a period of one year before the presentation of the petition, was made either in the ordinary course of business or in good faith and for valuable considerations, such transfer would not be annulled. Thus, the crucial question in all the cases is whether the transferor‟s dominant intention was to deny the assets to the creditors."
Learned counsel further relies upon a decision of the Bombay High Court in the case of Monark Enterprises Vs. Kishan Tulpule and others: (74) 1992 Company Cases 89 at page 115 and 116 of which it has been held as follows:
"It has been contended by Mr. Puri that the properties are worth crores of rupees. Prima facie, there is no material of any nature whatsoever to indicate that the transaction is undervalued. The impugned transaction was cleared by the Income Tax Department. In the absence of any reliable material and in view of the detailed particulars set out in the affidavit dated September 7, 1991, and reference to the book value of the asset reflected in the balance-sheet of the company, Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 22/47 I hold that this allegation is not at all proved. Prima facie, the transaction was entered into in good faith and for valuable consideration.
In the case of N.Subramania lyer V. Official Receiver, MANU/SC/0006/1957: [1958] 1 SCR 257, the apex court dealt with an identical question under insolvency legislation. It was held by the apex Court that the burden of proof was entirely on the official liquidator who impugned the transaction of transfer. In paragraph 10 of his judgment, Sinha J., speaking for the Bench of the Hon‟ble Supreme Court, observed that it was not necessary for upholding the transaction that the transferor who had been subsequently adjudged as an insolvent should have been honest and straightforward in the matter of the transaction impeached. It was observed in paragraph 11 of the said judgment that both the transferor and the transferee must have shared a common intention to defraud the creditors. It was held that unless the conduct of the transferee was blameworthy, the transaction could not be annulled. In that case, the High Court had accepted the submission of the official liquidator who represented the estate of the insolvent that the burden of proof was on the transferee to prove that the transaction was bona fide. Relying on several judgments of the Privy Council, the apex court negatived this proposition of law propounded in the judgment of the High Court under appeal. The definition of „good faith‟ in the General Clauses Act (X of 1987) is in these terms:
"A thing shall be deemed to be done in good faith where it is in fact done honestly, whether it is done negligently or not."
The same definition of „good faith‟ is not adopted under the Indian Limitation Act, 1963. The definition of „good faith‟ as set out Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 23/47 in the Limitation Act, 1963, states that a thing shall not be deemed to be done in good faith if not done without due care or caution. The definition of good faith as enacted in the Limitation Act was erroneously adopted in the High Court‟s judgment in support of its finding that the impugned transaction of transfer or usufructuary mortgage was not a transaction in good faith. The High Court held that the mortgagee had not acted with due care and caution and, therefore, the transaction could not be considered to have been effected in good faith. Overruling this approach of the High Court and its ultimate decision, our Supreme Court held that the definition of „good faith‟ given in the General Clauses Act (X of 1987) shall have to be read in all central statutes unless some other definition was provided in the specific statute. It was, therefore, held that the act of the transferee shall have to be held to have been done in good faith if it was done honestly, whether it was done negligently or without due care and caution. No definition of „good faith‟ is to be found in the Companies Act 1 of 1956."
Learned counsel further submits that the sale deed itself was executed on 24.8.1998 and was lodged on 8/9-10.1998 and the declaration/confirmation in the case of two of the sale deeds on 6.5.1999 were mere acknowledgement and thus the registration on the said date would refer back to 24.8.1998 as per the provisions of Section 47 of the Registration Act. It is thus argued that the interim order dated 20.11.1998 of this Court cannot have any effect on the subsequent registration on 6.5.1999. In support of the same learned counsel relies upon a Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 24/47 decision of the Supreme Court in the case of Thakur Kishan Singh Vs. Arvind Kumar: AIR 1995 SC 73, in para-3 of which it has been held as follows:
"3. The findings recorded by the High Court and the trial Court have been assailed by Shri Sen, the learned Senior Counsel appearing for the appellant, and it is claimed that the lease deed having been registered after the material date, it could not confer any title on the respondent as the right title-in-interest of the respondents predecessor already stood vested in the State prior to registration of the lease deed. The argument does not appear to be sound. Section 47 of the Registration Act provides that a registered document shall operate from the time it would have commenced to operate if no registration thereof had been required or made and not from the time of its registration. It is well established that a document so long it is not registered is not valid yet once it is registered it takes effect from the date of its execution. [See Ram Saran Lall v. Mst. Domini Kuer, AIR 1961 SC 1747 (1749) and Nanda Ballabh Gururani v. Smt. Maqbool Begum, 1980 UJ (SC) 597]. Since, admittedly, the lease deed was executed on 5th December, 1949, the plaintiff after registration of it on 3rd April, 1950 became owner by operation of law on the date when the deed was executed.
Therefore, the land did not vest in the State.
And the courts below not commit any error in negativing the claim of appellant."
Learned counsel also relies upon a decision of a Division Bench of this Court in the case of Jamuna Prasad Vs., Bhuneshwar Thakur and others: 1987 PLJR 251, para-7 of which is quoted below:
Patna High Court COM PET No.11 of 1998 (104) dt.15-05-201425/47
"7. Sec. 47 of the Act is as follows :-
"47. Time from which registered document operates. - A registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made, and not from the time of its registration."
The scope of Section 47 was considered by the Supreme Court in the case of Ram Saran V/s. Domini Kuer, AIR 1961 SC 1747. It was pointed out that registration under the Act is not complete till the document to be registered has been copied out in the office of the Registration Office, as provided by S.61 of the Act. It was pointed out that once the registration is complete, in view of S.47 of the Act, the registered document operates from the date of its execution."
He also relies upon another Division Bench decision of this Court in the case Sadei Sahu Vs. Chandramani Dei and another: AIR 1948 Patna 60, in para-4 of which it has been held as follows:
"4. This Section can only be read together with S.54, T.P.Act, 1882, on the basis that the transfer by registered instrument under S.54, T.P.Act, 1882, once effected, relates back to the date of execution or other conventional date. That this is so, is, in my opinion, clear from the decision of the Judicial Committee in 8 P.L.T. 327 and from the application of that decision made by a Division Bench of this Court in 19 P.L.T. 383. In the case in the Privy Council, it was held that where a Hindu governed by the Mitakshara School executed a deed of gift and made it over to the donee, who accepted the gift, but prior to registration the donor adopted a son, the adoption Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 26/47 did not render the gift inoperative, although the gift had not been registered before adoption. The ratio decidendi of their Lordships‟ decision was stated by Lord Salvsen as follows:
"They (their Lordships) are unable to see how the provisions of S. 123 T.P. Act can be reconciled with S 47, Registration Act, except upon the view that, while registration is a necessary solemnity in order to the enforcement of a gift of immovable property, it does not suspend the gift until registration actually takes place. When the instrument of gift has been handed by the donor to the donee and accepted by him, the former has done everything in his power to complete the donation and to make it effective. Registration does not depend upon his consent, but is the act of an officer appointed by law for the purpose, who, if the deed is executed by or on behalf of the donor and is attested by at least two witnesses, must register it if it is presented by a person having the necessary interest within the prescribed period. Neither death or the express revocation by the donor, is a ground for refusing registration, if the other conditions are complied with."
It is also submitted by learned counsel that whatever payments have been made by the purchaser are reflected in the Books of Accounts of the Company M/s. Vridhishri Hotel (India) Pvt. Ltd.
It is further contended by learned counsel for the purchaser that the company (in liquidation) itself accepted the sale deeds and never took steps to get it annulled and for the first time in 2006 took the stand before this Court that the purchaser is Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 27/47 trespasser after having developed evil eye towards the property.
Learned counsel for the Ex-Managing Director, on the other hand, relies upon various statements made in different affidavits and replies filed by the purchaser pointing out the contradictions in the affidavits with regard to different payments. He also points out that the contradictions, despite being pointed out with regard to payment of different amounts, have not been clarified in the reply filed on behalf of the purchaser.
It is, accordingly, contended by learned counsel for the Ex-Managing Director that the agreement for sale was for Rs. 50 lacs, whereas the sale deeds were only for Rs. 19.93 lacs and further Rs. 8 lacs for furniture and fixture making a total of Rs. 27.93 lacs and even the lesser amount under the sale deeds have not been shown to have been paid, as most of the cheques had stood dishonoured. It is further submitted by learned counsel that different stands have been taken by the purchaser in different affidavits and even in the new story introduced with regard to Lalbabu Yadav and his son Dependra Kumar Yadav at first stand taken is that an amount of Rs. 18 lacs and Rs. 2 lacs as interest were paid on the direction of the Ex-Managing Director but in the subsequent affidavit the stand taken is that Rs. 18 lacs was Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 28/47 directed to be paid and there was clear prohibition by the Ex- Managing Director not to pay another further amount of Rs. 2 lacs demanded by way of interest. It is also pointed out that despite all those statements receipts only to the extent of Rs. 10.75 lacs have been brought on the record.
Learned counsel further pleads that three elements are necessary for the completion of a sale, namely, property, party and price and so far as the price is concerned, it has been clearly stated that the entire price has not yet been paid and thus the sale deeds are fit to be declared as void. It is submitted that it was for the said reasons that the stand was initially taken that the H.C. Building was in the possession of trespassers.
Learned counsel for the intervenor has sought to rely upon the interim order dated 20.11.1998 passed by this Court restraining the Directors from disposing of the property of the company by sale or otherwise and from withdrawing the money from the Account of the company. It is submitted that at least two of the sale deeds have been registered admittedly on 6.5.1999 on the basis of a so called declaration/ confirmation dated 6.5.1999 which, in view of the specific direction of restrain by this Court to the Directors of the company, cannot be given effect to and thus the registration being in the teeth of the order of this Court Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 29/47 the said two documents are fit to be quashed on the said ground itself apart from applicability of Section 531A of the Companies Act.
Learned counsel has further argued that the floor area of the Basement, first floor and second floor comes to 11,600 sq. ft. besides roof/terrace rights having been given with respect to 3200 sq. ft. which clearly goes to show that the sale has been made at the rate of Rs. 120 per sq. ft of the built up area whereas it is well known that the property is situated in Patna‟s most important commercial location at Exhibition Road and that value of the property in the year 1997 would be 5 to 10 times the said valuation and even the land measuring 3 kathas 10 dhurs could not have been obtained for the said value of Rs. 19.93 lacs as mentioned in the sale deeds irrespective of the Government valuation that may have been fixed. It is also pointed out that the company itself having admittedly purchased the land through an agreement for sale on 31.8.1994 for Rs. 36 lacs, thus, bona fide of the transaction has to be proved by the purchaser as to how the same land could have been purchased by them for Rs. 27.93 lacs more than three years later.
It is thus, submitted by learned counsel that since there was no proper consideration for the sale, the same is not a Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 30/47 bona fide transaction nor in the ordinary course of business and only to defraud the creditors and therefore, fit to be quashed.
The O.L. has also sought to assail the transaction stating that it is fit to be declared void under Section 531A of the Companies Act for the simple reason that the Agreement for Sale being for an amount of Rs. 50 lacs whereas the sale deeds of the land and building are only for Rs. 19.93 lacs, hence, the whole transaction is based upon fraud and collusion between the Ex- Management and the purchasers which vitiates the transaction.
It is further submitted by the O.L. that the resolution of the Board of Directors is dated 1.12.1997 and therefore it is difficult to believe that within three weeks the whole transaction had got finalized and no attempt was made by the company to get better price for the property which is situated in the prime location in the town of Patna by giving wide publicity, which could have been easily done. It is submitted that the procedure for auction after fixing reasonable reserve price on the basis of valuation would have resulted in realization of many times over the amount mentioned in the Agreement for Sale of Rs. 50 lacs and the final sale consideration of Rs. 19.93 lacs for the land and building.
It is contended that it is well established that the Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 31/47 onus of the O.L. under Section 531A is only to show that the transaction was prima facie not bona fide, which is clearly shown by the fact that the agreement was for Rs. 50 lacs whereas the registered sale deeds are for Rs. 19.93 lacs plus Rs. 8 lacs for furniture and fixture after that it is for the purchaser to show that he has entered into a bona fide transaction for sale.
It is also submitted by the O.L. that the lack of bona fides of the sale transaction is further proved by the fact that instead of a single sale deed four separate sale deeds, each of less than Rs. 5 lacs were executed and that too registered not at Patna in terms of the requirement as per Bihar Amendment of the Registration Act but at Bombay, the whole intension being to avoid scrutiny from the Income Tax Department as the property was worth at least ten times more than the price on which it has been alleged to have been sold. It is submitted that the very attempt made in the case of a property belonging to a limited company to arrange registration of the said sale transaction at Bombay so as to avoid scrutiny from the Income Tax Department would show lack of bona fides in the transaction.
It is also submitted by the O.L. that the whole story of payment of advance given by the Dependra Kumar Yadav and his father Lalbabu Yadav has been cooked Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 32/47 subsequently at a much later stage in the 5th affidavit out of 7 total affidavits filed by the purchaser in the matter, to fill up the gap in the Agreement for Sale of Rs. 50/- lacs and sale made merely at Rs. 19.93 lacs.
It is contended that the whole purpose of having sale deeds at lower value was to avoid scrutiny of Income Tax Department as even at the total value of Rs. 50/- lacs in the Agreement for Sale, the sale deeds could not have passed muster from the Income Tax Department.
In this regard it is pointed out by the O.L. that the value of constructed building on the ground floor has been shown at Rs. 4,99,000/- having total area 4200 sq. ft., the first floor having a area of 4200 sq. ft. at Rs. 4,99,000/- but curiously enough the value of 3200/- sq. ft. of basement has also been shown at Rs. 4,98,000/- and to cap it all the fraudulent nature in which the sale deeds have been prepared is finally shown by the sale deed with respect to roof/terrace of 3200 sq. ft. at Rs. 4,97,000/-. It is submitted by the O.L. that the area in which that property is located which is commercial in nature, in which ground floor is 3-4 times greater in valuation than those of the upper floors or basement and roof rights would be less than 10% of the value of the ground floor. The fact that the sale deeds have Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 33/47 been manipulated to show less value so as to avoid scrutiny by Income Tax Department is sufficient to show not only lack of bona fides but clear mala fides on the part of the vendor and purchaser in the matter.
The O.L. further points out that sale of prime property at Exhibition Road at the rate of approximately Rs. 100 per sq. ft. even in the year 1997 can never be considered fair valuation as the market value of such property was at least 10 times or even much more than that.
It is also urged by the O.L. that there is nothing on the record to show that the money has been received by the company as no such document has been filed either by the purchaser or the Ex-Managing Director in that regard. It is submitted that in this regard there is clear statement by the Managing Director himself regarding dishonour of all the cheques practically and non-receipt of payments by cash to the extent claimed by the purchaser. It is further submitted that several of the said receipts are not even in the letter head of the purchaser company but other group companies. In this regard it is submitted by the O.L. that huge amount in cash is sought to be shown as paid but such transaction cannot be accepted as it is not permissible for a limited company to indulge in such type of cash Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 34/47 transactions and unless the requisite proof of those amounts of cash having gone into the account of the company is shown, which has not been done, the same shows collusive conduct between the purchaser and the Ex-Managing Director.
It is also urged by the O.L. that for an Agreement of Sale at Rs. 50/- lacs possession could not have been given by the company to the purchaser only on payment of Rs. 5 lacs, which again shows mere camouflage to dispose of the property of the company to defraud all its creditors. The said transaction being a camouflage, shows lack of bona fides by both the transferor and the transferee in the matter. It shows connivance between the Ex-Managing Director and the purchaser for their personal benefits.
The O.L. also assails the subsequent reference made to negotiation and finalization on 22.1.1997. It is submitted that there was no such statement earlier in several of the affidavits filed by the purchaser before the O.L. or this Court and the same is a completely false and concocted statement made subsequently as at that stage there was no reason before the Board of Directors that the property in question should be sold.
The O.L. further assails the so called making up of the story of Dependra Kumar and his father Lalbabu Yadav of Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 35/47 having paid Rs. 18 lacs for the purchase of H.C. Building in the year 1997 itself but nothing has been brought on the record to show that any amount was ever paid to the company at any stage. It is further submitted that the so called letter dated 7.5.1998 appears to be a subsequent creation in connivance between the purchaser and Ex-M.D. and a mischievous document which cannot be given any credence.
In this regard it is also submitted by the O.L. that if at all there was a genuine claim of said Dependra Kumar and his father Lalbabu Yadav then also the full purchase price ought to have been shown in the Sale Deed and paid to the company in the manner required i.e., through cheques and bank drafts and thereafter the dues amount, if any, could have been paid by the company to the so called Dependra Kumar and his father Lalbabu Yadav, who have not even come forward to support the said stand by filing affidavit in the matter, after proper entry in the accounts of the Company and in any case the sale deeds could not have been for any amount less than Rs. 50/- lacs if at all the transaction is to be considered as bona fide.
The O.L. also refers to the restraint order dated 20.11.98 passed by this Court and submits that it was not open to any Director of the Company including the Ex-M.D. to have Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 36/47 issued any document like the one relied upon by the purchaser, namely, declaration/confirmation dated 6.5.1999 or appeared before the registrar at Bombay for confirmation of execution of the sale deeds for the purpose of registration of two of the sale deeds and the same clearly amounts to flouting the order of this Court and thus no benefit can be derived from any such registration on the basis of deed of declaration/confirmation dated 6.5.1999.
The further stand has been taken by the O.L. that no resolution has been brought on the record by Mr. A.K.Srivastava, Managing Director of M/s.Vridhishree Hotel Ltd. having ever been authorized by the said company and thus all affidavits filed by him should be rejected.
It is submitted by the O.L. that the so called sale deeds are also attempt to defraud the revenue of stamp duty and registration fees by showing amount less than in the Agreement for Sale and goes to show the fraud in the entire transaction making it fit to be declared as void under Section 531A of the Act.
In support of his aforesaid stand the O.L. has relied upon a decision of the Madras High Court in the case of P.G.Vivekanandan and ors. Vs. R.P.S. Benefit Fund Ltd.: (115) Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 37/47 2003 Company Cases 649 at pages 666 and 667 of which it has been held as follows:
"Even according to the affidavit filed by the company, the board of directions of RPS Benefit Fund Ltd., it is claimed that a resolution was passed by the company on April 22, 1999, to sell the property in question and on the very same day the agreement was entered into. Peculiarly there was no negotiation at all, nor was there an effort to find out the best purchaser or search for any other purchaser. The agreement was entered on April 22, 1999, and the company petition was presented on July 26, 1999.
According to the official liquidator the agreement entered into between the company and the applicant is a fraudulent preference and the sale is void in law. The liquidator relies upon section 531A of the Companies Act. The request of the applicant to treat the sale executed by the company as valid does not deserve any further consideration and it deserves to be dismissed. The contention that the plot was odd-sized or that sufficient space has to be left for purpose of promotion of construction cannot be countenanced. The location of the plot which is in the heart of the town should not be lost sight of. The very fact that without any demur substantial sum has been paid by the applicant without protest towards additional stamp duty would not only show the market value, but also the transaction has been entered into for less than the purchaser market value and it has been entered into collusively only with a view to deceive the creditors, to give preference to a set of creditors of the director‟s choice. The fact that under section 47A without any demur the entire deficit stamp duty has been paid on the very date on which sale deeds were presented itself, is a fact which reflects on the applicant. The contention that there is a steep fall in the real estate market cannot be countenanced at all. It may be that there may not Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 38/47 be any shooting up of the prices. But there was no fall in prices, much less, as sought to be made out. The contention that the property was not a property of the company on the date of filing of the company petition is a misconception and it runs counter to the statutory provision namely section 531A of the Companies Act. Assuming for purposes that the entire sale consideration has been applied for discharge of certain depositors and there is no fraud, but there is no material at all to show that the entire sale proceeds had been utilized to discharge the liability of the company or the depositors. No particulars have been furnished. The property has been undervalued and deficit stamp fee of Rs. 23,60,956 has been determined and paid without any demur by the applicant in terms of section 47A. That apart, at or about the same time, the directors in control of RPSB have drawn huge sum to the tune of Rs. 23,00,000/- from the RPSB and there is no account or explanation for the same. Even if the Appropriate Authority had given the approval for the transaction, the same cannot shield the transaction which is fraudulent transaction. The very permission granted by the Appropriate Authority is rather strange and requires to be examined by a competent authority. Less said is better with respect to the Income-tax Department, who accorded permission as well.
The plot in question is facing G.N. Chetty Road on one side and on the Boag Road on the other side. Both the roads are prominent roads in the Metropolitan City and it commands respect and locational advantage being there are a number of commercial establishments and prestigious hotels or business houses are located.
In the light of the above discussions, the applicants in these applications are not entitled to any relief and all the points are answered against the applicants. This Court holds that the property in question has not been sold bona fide in good faith and in the interest of the transferor-company.Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 39/47
This Court also holds that the property has not been sold for a fair market price and therefore the transaction is not bona fide. This Court has to sustain the objections raised by the respondents and the administrator that substantial amount has been siphoned off by the sale transaction which has been effected far below the fair market value or existing market value. The transaction has been entered into with a view to defeat the claims of the creditors and in preference to a set of persons and to enable the directors in management to encash the benefit for themselves. The said transactions are not bona fide, nor valid and it is not binding. Therefore, all the points are answered against the applicant.
In the result, the above applications are dismissed with costs."
On a consideration of the rival submissions of learned counsels for the purchaser, Ex-M.D., intervenor as also the O.L., this Court is inclined to accept the submission of the O.L. It is evident from the detailed conspectus of facts as also from the affidavits of different parties particularly that of the purchaser that the company (in liquidation) itself purchased the property entering into agreement in the year 1994 for a consideration of Rs. 36 lacs with furniture and fixture. Thereafter it is alleged that an Agreement for Sale was entered on 23.12.1997 for Rs. 50 lacs including furniture and fixture. It is evident that even if all the other allegations are excluded then the sale deed ought to have been for Rs. 50 lacs which, excluding the agreement for sale of furniture and fixture for Rs. 8 lac, the Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 40/47 sale deed for the building in question ought to have been for Rs. 42 lacs. There was no good reason that when the entire Hotel was being sold as a unit along with all its furniture, fittings and fixtures there should have been four separate sale deeds prepared for registration of the sale. Even if four sale deeds were to be prepared then considering the value taken in each of them or at least three of them on a proper valuation would have been above about Rs. 10 lacs which would have required clearance from the Income Tax Department for such sale, in terms of the provisions of the Income Tax Act. It is evident that both the Ex-M.D. of the company (in liquidation) as also the purchaser were anxious to avoid scrutiny by the Income Tax Department as they were afraid that it would be difficult to justify such low valuation with respect to property situated in the most important commercial location of Exhibition Road in Patna. If they were afraid of getting income tax clearance even for say Rs. 42 lacs for the land and building in question that itself goes to show that the property was worth much more several times over even the said price. Ultimately, the sale deeds are only for Rs. 19.93 lacs which would be impossible for such prime property at Exhibition Road at such cheap rates even in the year 1997 and that would be irrespective of any circle rate fixed by the Government/District Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 41/47 Registrar in the matter. Thus the manner in which the sale deeds had been registered makes it practically impossible for the purchaser to show the bona fides of the transaction or that it was entered into in the ordinary course of business.
It is also evident from the materials on the record that the purchaser has failed to show that even the amount of Rs. 27.93 lacs has been paid by it to the company as practically all the cheques that it had issued in that regard had been dishonoured.
So far as the cash transactions are concerned, the same also throws serious doubt upon the bona fides of the transaction as it is not expected of a limited company to have entered into huge transaction in cash that too with respect to sale and purchase of immovable property and is contrary to the requirement under the Income Tax Act. The purchaser has been unable to show that benefit of such cash payments if any have gone to the company and not into the private pockets of the Directors of the company and that again would show that the transaction was not in the ordinary course of business or in good faith or for valuable consideration and shows the connivance between the purchaser and the Ex-M.D. for their personal benefit at the cost of the company.
Patna High Court COM PET No.11 of 1998 (104) dt.15-05-201442/47
This Court is also unable to accept any such story of any prior agreement with the said Dependra Kumar and his father Lalbabu Yadav as no chit of paper nor any Agreement for Sale has been brought on the record in this regard. It is quite unacceptable that a person would pay a huge amount of Rs. 18/- lacs for the purchase of property without there being any Agreement for Sale or receipt showing payment in that regard. Moreover the story of Dependra Kumar and his father Lalbabu Yadav has been cooked up in the 5th affidavit filed by the purchaser and it clearly shows the concoction and figment of imagination and the letter written by the Ex-M.D. dated 7.8.1998 thus could easily have been created subsequently after it became difficult for the purchaser to justify its stand of sale deeds being only to the extent of Rs. 27.93 lacs as compared to Agreement for Sale price of Rs. 50 lacs. Moreover there are serious discrepancies in the story or even the amount paid to them, whether Rs. 20 lacs or Rs. 18 lacs, as pointed out above. Such subsequent story is clearly to be rejected as a concoction and afterthought.
The decisions relied upon by learned counsel for the purchaser do not support his stand as the facts of the present matter are on entirely different footing and there has been Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 43/47 complete failure on the part of the purchaser to show its bona fide in the matter. On the other hand, the decision of the Madras High Court in P.G.Vivekanandan‟s case (supra) is clearly applicable as in the present matter also a very valuable property in a prime location has been sought to be sold within practically three weeks after the Board of Directors‟ resolution to sell the said property without there being any negotiation at all nor any efforts to find out the best purchaser or search any other purchaser. The Agreement for Sale was entered into on 23.12.1997 and the company petition itself has been filed on 26.8.1998.
This Court finds sufficient force in the submission of the O.L. that the agreement entered into between the company and the purchaser is fraudulent and the sale therefore, would be void in law. There is further nothing on the record to show that even limited amount of sale consideration that was received out of the lower amount of the sale deeds at Rs. 27.93 lacs had been paid for discharge of the liabilities of the company or the depositors as no particulars have been brought on the record.
That the property has been under valued in the sale deeds is evident from the fact that the Agreement for Sale was for Rs. 50 lacs whereas the sale deeds are for Rs. 19.93 lacs plus Rs. 8 lacs for furniture and fixture. In the present matter the Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 44/47 situation is much worse than even in P.G. Vivekanandan‟s case (supra) as the whole attempt in the transaction was to escape from the scrutiny by the Income Tax Department as there was every likelihood that the company in liquidation and the purchaser were apprehending that such permission would not be granted with respect to such prime property even at the sale price of Rs. 50 lacs.
It is also not in dispute that the property in question is situated at Exhibition Road which is the most prime location in the town of Patna having large number of commercial institutions as also prestigious hotels and business. Thus, this Court is of the view that the property in question has not been sold bona fide and in good faith and in the interest of the transferor company nor it has been sold in the ordinary course of business.
This Court is also in agreement with the submission that the whole transaction much below the existing market value of the property in question in the year 1997-98 has been effected in connivance between the purchaser and the Ex- Managing Director and other Directors of the company (in liquidation). A large number of claims were pending against the company from the depositors. The company (in liquidation) Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 45/47 being a non-banking financial company, the attempt was to defeat the claim of the creditors and in preference to set up persons so as to enable the Directors and the management to enter into the sham transaction and therefore the same shall not be binding on the O.L. All the four sale deeds and the Agreement for Sale of furniture and fixtures are, accordingly, declared as void against the O.L. At this stage, I may refer to another ground on which at least two of the sale deeds would be void. The sale deed with regard to Basement, although it had been lodged for registration on 8.10.1998 but the Ex-M.D. of the vendor company did not admit the execution of the documents before the Sub- Registrar at Bombay on 8.10.1998. The same was the position with regard to sale deed relating to roof/terrace which was lodged for registration on 9.10.1998 in the office of Sub-Registrar, Bombay but the execution was not admitted on 9.10.1998 before the Sub-Registrar. On 20.11.1998 this Court passed specific order restraining the Directors from disposing of the property of the company by sale or otherwise and from withdrawing money from the Account of the Company. It is evident that after such a restraint order it was not open to the Ex-Managing Director to have issued any deed of declaration/confirmation dated 6.5.1999 Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 46/47 as he had done with respect to these two sale transactions upon which the same has been registered. Any such action in violation of restraint order of this Court would make the transaction by the Director as null and void in the eye of law and the reliance by learned counsel for the petitioner on several decisions that under Section 47 of the Registration Act, the sale upon registration would refer back to the date of execution i.e., 24.8.1998 can be of no assistance in the present matter as the same could not apply if there was anything further to be done by the Directors who were under a restraint order of this Court. Had the execution been admitted before the Sub-Registrar on 8.10.1998 or at any time before restraint order dated 20.11.1998 of this Court, the matter would have been different but once the Directors had been restrained from taking any such steps then no such document by way of deed of declaration/confirmation for registration of documents could have been given for the registration of the sale deeds; such provisions of law like Section 47 of the Registration Act cannot be applied to defeat the specific direction of this Court given to protect the property of the company. The two sale deeds are therefore declared as null and void on the further ground as having been registered in violation of the restraint order dated 20.11.1998 of this Court, on the basis of deeds of Patna High Court COM PET No.11 of 1998 (104) dt.15-05-2014 47/47 declaration/confirmation issued by the Ex-Managing Director of the company in liquidation on 6.5.1999.
In the aforesaid circumstances, the prayer of the O.L. is allowed and all the four sale deeds and the Agreement for Sale of furniture and fixture are declared to be null and void. The purchaser M/s.Vridhishree Hotels Ltd is directed to hand over peaceful possession of the said property to the Official Liquidator forthwith and in any case within a period of two weeks from today.
S.Pandey/- (Ramesh Kumar Datta, J)