Delhi High Court
M/S. Taneja Developers And ... vs The Official Liquidator And Ors. on 22 August, 2013
Author: S.Ravindra Bhat
Bench: S. Ravindra Bhat, G.P. Mittal
$~1 & 2
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 12.07.2013
Decided on: 22.08.2013
+ CO.APPL.26/2011, C.M. NO. 7989/2011 (for stay)
M/S. TANEJA DEVELOPERS AND INFRASTRUCTURE
LTD. AND ANR. .....
Appellants
versus
THE OFFICIAL LIQUIDATOR AND ORS...... Respondents
+ CO.APPL.27-29/2011, C.M. APPL.8046/2011 (for stay),
C.M. APPL.8728/2012 (Under Order I Rule 10), C.M.
APPL.8729/2012 (for exemption), C.M. APPL.8730/2012 (Under
Order I Rule 10) & C.M. APPL.8731/2012 (for exemption)
DELHI AUTOMOBILES LTD. ..... Appellant
versus
THE OFFICIAL LIQUIDATOR AND ANR...... Respondents
Appearance: Sh. Bhanoo Sood, Advocate, for
Appellant No.1 in Item No.1.
Sh. Girdhar Govind with Ms. Priyanka Kalra,
Advocates, for Resp. No.2 in Item No.1 and for
appellant in Item No.2.
Ms. Kajal Chandra, Ms. Renu Kuhar and Ms. Swati
Sinha, Advocates, for Resp. No.2 in Item Nos. 1
and 2.
Sh. Rajiv Behl and Sh. Manish Bishnoi, Advocates,
for Official Liquidator.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE G.P. MITTAL
MR. JUSTICE S. RAVINDRA BHAT
%
FACTS:
1. This judgment will dispose off two appeals: one preferred by
CO. APP.26/11 & CO. APPL. 27-29/11 Page 1
Taneja Developers and Infrastructure Ltd. (hereafter "Taneja") and
the other by the Delhi Automobiles Ltd ("DAL"), against the order of
the learned Company Judge, dated 04.04.2011 in C.A. No. 2462/2010,
2382/2010 and 127/2011 (in C.P. No.161/1997).
2. Briefly, the facts are that in 1997, a petition for winding up was
filed by M/s. Rocksmelt Company (India) [the second respondent]
against M/s. Ganga Automobiles Limited (GAL). During the
pendency of those proceedings, on 02.02.1998, Mr. G.S. Suri, father
of Mr. Ashwin Suri (Managing Director of GAL), appeared before the
Company Court and offered to pay the unsettled dues of GAL, in his
capacity as DAL, by selling the property situated at 1, Sikandra Road,
New Delhi (hereafter "suit property"). The offer was accepted by the
Court, which then ordered that the property would be deemed to be
attached and sold under Court supervision, if not sold within 3 ½
months. This was expressly recorded by the order of Court, in the
company winding up proceeding, as follows:
"02/02/1998
".............It is submitted by the learned counsel for the
respondent that M/s Delhi Automobiles Limited have
immovable property, namely, 1, Sikandara Road, New
Delhi. According to the learned counsel for the
respondent the property is extremely valuable. He further
states that efforts are being made to sell the property and
in case the property is sold, the money will ftrst be
utilized for meeting the amount due to the creditors who
have filed petitions in this Court. He further states that
the Chairman of MIs Delhi Automobiles Limited and Mr.
Mukhinder Singh, the Director of M/s Ganga
CO. APP.26/11 & CO. APPL. 27-29/11 Page 2
Automobiles Limited are present in Court and their
statements may be recorded Let their statements be
recorded.\
Sd/
February 2, 1998. Anil Dev Singh, J
The statement of Mr. G.Sagar Suri, Chairman, Al/s Delhi
Automobiles Limited, and Mr. Mukhinder Singh,
Directors of M/s Ganga Automobiles Limited, have been
recorded The undertakings given by them are accepted
In case the property No. 1, Sikandara Road, New Delhi is
not sold within a period of three and-half months and the
amounts which are due to the creditors who are before
this Court are not paid off or any other favourable
arrangement securing the monies of the creditors is not
reached within the above said period from today, the
property No. 1, Sikandara Road, New Delhi will be
deemed to have been attached and will be sold under the
supervision of the Court..........."
3. On 03.02.1998, Mr. G.S. Suri sought to withdraw the statement
he had made the previous day on the ground that he had made it (the
statement) without authority from the Board of Directors of DAL, the
company which owned the suit property. The Court directed that that
the request to withdraw the undertaking recorded in the order, i.e. the
part pertaining to attachment of the property at Sikandra Road, would
take effect if a review of the order dated 02.02.1998 was sought. On
20.02.1998, the Court modified its previous order, stating that the
order would have no effect till the next hearing on 22.05.1998, by
which date the company would make all efforts to repay their
creditors, failing which the company would be deemed to be wound
up. The order made thereafter however, did not make any reference to
CO. APP.26/11 & CO. APPL. 27-29/11 Page 3
the property situated at Sikandra Road, and stated that "the order
dated 20th February, 1998 needs no variation," once an undertaking
to deposit `610 lakhs was made. On 18.8.1998, GAL was directed to
be wound up and an Official Liquidator was appointed.
4. DAL filed an application, C.A. No. 1508/98, for review of the
order dated 02.02.1998. An application, C.A. No. 1421/05, was also
filed for amendment of the review petition. On 13.08.2009, both these
applications were dismissed for non-prosecution. Subsequently an
application, C.A.1242/09, for revival of these applications was also
dismissed for non-prosecution on 18.3.2010.
5. DAL claims to have entered into an agreement to sell the suit
property on 24.12.2002 to Taneja for a consideration of `25 crores out
of which a sum of `5 crores was paid to DAL. By lease deed dated
14.01.2003, the 1st floor of the property was let out to Universal
Buildcon India Ltd (hereafter "Universal"), the second appellant in
Taneja‟s appeal. Universal is an associate company of Taneja, and
physical possession of the property was handed over subsequently.
Universal apparently paid `2 crores towards the lease agreement
which was adjusted as part consideration towards the sale.
6. In November 2006, Taneja filed a suit for specific performance
of the sale agreement and for a permanent injunction. In 2007,
Universal also filed a similar suit with respect to the lease deed. Both
suits are pending on the file of this Court. On 31.01.2007, a Single
Judge in the suit noted that the counsel for the defendant stated that
the understanding that the parties had entered into on 08.12.2006
would continue till the next date. On 27.02.2007, the Single Judge
CO. APP.26/11 & CO. APPL. 27-29/11 Page 4
appointed a local commissioner for the property and directed the
parties to maintain status quo with respect to the possession of the
property as per the report of the local commissioner. On 27.07.2009,
the order of injunction passed in respect to C.S. (O.S.) 2182/2006
directing status quo was continued till further orders.
7. By application, C.A. 2382 of 2010, the Official Liquidator
sought directions to DAL to hand over possession of the suit property.
He also submitted that before any orders were made, he would try to
regain the possession of that property. The Court then re-notified the
case for 27.01.2011, further stating that the consequence of Mr. G.S.
Suri‟s dishonouring the undertaking made by him to the Court would
also be considered. Later, a fresh application, C.A. No.127/2011, was
moved by the Official Liquidator seeking directions to the police for
providing aid in taking possession of the suit property. DAL resisted
the application on the ground that there was no Court order directing
the sale of the property, and placed the title deed of the property on
record.
8. On 04.02.2011, the Appellants filed an application, C.A.
192/2011, under Rule 9 of the Company Court Rules for appropriate
orders to recall the order of attachment and seek confirmation of the
sale agreement. This application was withdrawn when the Single
Judge allowed the Appellants to approach the Court again after the
disposal of the applications for sale of the property filed by the
Respondents. The Single Judge, however, reserved orders on the
applications of the liquidator, without notice to DAL.
9. On 04.04.2011, the Company judge by the impugned order held
CO. APP.26/11 & CO. APPL. 27-29/11 Page 5
that the suit property Sikandra Road stood attached and was liable to
be sold, reasoning that Mr. G.S. Suri held a valid power of attorney
from the previous owners and was therefore competent to make the
statement.
APPELLANTS' ARGUMENTS:
10. It is urged that the learned Single Judge erred inasmuch as in
the winding-up proceedings of GAL, the Company Court ordered
attachment and sale of property admittedly owned by another
company (DAL), for which Taneja had already entered into
agreement to sell and paid a substantial consideration, and for
enforcement of which it had already filed a suit for specific
performance. In the suit, the Court issued a restraint order in respect
of the suit property as regards possession and against alienation. It
was argued that, likewise, the learned Company Judge overlooked
that Universal too had entered into a lease agreement with DAL for
renting the entire first floor of the suit property and is in possession of
the same. For enforcement of that lease deed, it too filed a suit for
specific performance in which the Court has issued an interim order
as regards possession.
11. Taneja urges that on a proper and fair reading of the orders
dated 02.02.1998, 03.02.1998 and 20.02.1998, the so called deemed
attachment of property ordered on 02.02.1998 was stayed by the
Court on 20.02.1998 till next date and on the next date i.e.
22.05.1998, the Court directed that "... the order dated February 20,
1998 needs no variation. Therefore, the suit was taken out of the
CO. APP.26/11 & CO. APPL. 27-29/11 Page 6
purview of attachment order and the learned Single Judge is in gross
error of fact in holding that the said property was under order of
deemed attachment." The order dated 02.02.1998 thus stayed the
attachment of the property and on the next hearing, the Court directed
that the previous order needed no variation. This translated to the
concerned suit property being removed from the purview of the
attachment proceedings.
12. Learned Senior Counsel for Taneja, Dr. Singhvi, argued that the
impugned order overlooked that that the Appellants entered into a
bona fide agreement to sell and lease for valuable consideration
without notice of the pending proceedings and, therefore, their rights
and interests ought to have been protected especially when the learned
Single Judge was cognizant of those said facts. Significantly, Counsel
stressed that it was brought to notice of the learned Single Judge that
there existed a restraint order against alienation or encumbrance or
parting with the possession of the suit property till disposal of the suit
by a learned Single Judge of this Court. It was submitted in this
regard that a contract for conveyance of immovable property (like the
two agreements in question here with DAL, in respect of the suit
property) entered into before the attachment order, cannot be
considered binding upon the bona fide purchaser, on whom such order
would act in an oppressive manner. Learned senior counsel
contended, on the strength of the decisions reported as Vannarakkal
Kallalathil Sreedharan v Chandramaath Balakrishnan & Anr. 1990
(3) SCC 291; Rajender Singh v Ramdhar Singh 2001 (6) SCC 213 and
Kancherla Lakshminarayana v Mattaparthi Syamala & Ors 2008
CO. APP.26/11 & CO. APPL. 27-29/11 Page 7
(14) SCC 258, that a contract of sale entered into before attachment
orders are made, conveys good title in spite of attachment.
13. Taneja contends that the order of the Single Judge is erroneous
as far as it ordered attachment of the property owned by another
company, in respect of which the High Court had already passed an
order for specific performance and granted a permanent injunction for
possession and alienation. This, therefore, causes an inconsistency
between two judicial orders which results in confusion and
miscarriage of justice. It was urged that on 02.02.1998, the property
did not vest with DAL, which had entered into an agreement to
acquire it from its original owners and Mr. G.S. Suri was only holder
of a power of attorney for certain purposes. He, therefore, did not
possess any authority to make the statements concerning the suit
property. Even if he were to be considered competent to make such
statements, the same was ultra vires the Memorandum of Association
and Articles of Association of DAL, as it was beyond the objects of
the company to be a guarantor for the debts of other companies. The
appellants are bona fide purchasers/lessees for valuable consideration
and were not given any notice of the pending proceedings concerning
the property. Their rights should have therefore been protected.
Learned counsel relied on the judgment reported as Shubh Shanti
Services Ltd v Manjula S. Agarwalla & Ors 2005 (5) SCC 30 and
submitted that in the absence of express authorization or power a
Director or Managing Director of a company cannot enter into
binding obligation on its behalf, especially those which result in
encumbrance of its immovable properties or in any manner create
CO. APP.26/11 & CO. APPL. 27-29/11 Page 8
clogs on its transfer or alienability. It was also argued that no benefit
flowed to DAL as a result of the unilateral statement of Shri Suri.
Even otherwise, property was offered to prevent winding up of
another company, GAL. Winding up was eventually ordered and
consequently, the property cannot be now the subject matter of
attachment.
14. It was submitted that the withdrawal of the statement made by
Mr. Suri was immediate and suffered from no delay - reliance is
placed on the order dated 03.02.1998, in this regard.
15. Counsel for the appellants urged that the Official Liquidator
only had authority to take control of the property of the company
under liquidation and not of another party unconcerned with the
liquidation. In this context, it was submitted that Section 433 of the
Companies Act entitles a creditor to realize the valid debts of the
company; GAL‟s winding up proceedings could not confer
jurisdiction over DAL‟s property.
16. It was lastly urged that Taneja or DAL should not be driven to
substantial proceedings in the form of a title or declaratory suit.
Learned senior counsel submitted that the nullity of an order without
jurisdiction can be successfully set up at any stage, even in
unconnected or collateral proceedings. Learned counsel relied on the
decision reported as Chiranjilal Shrilal Goenka v Jasjit Singh 1993
(2) SCC 507.
17. Learned counsel for the DAL, Shri Girdhar Govind, adopted
the arguments made on behalf of Taneja and further added that the
learned Single Judge did not give opportunity to the parties to address
CO. APP.26/11 & CO. APPL. 27-29/11 Page 9
as to the true effect of the previous orders. The impugned order
seriously prejudiced the entitlements of DAL, and consequently
Taneja, inasmuch as the title which was acquired by the latter as an
innocent third party purchaser was seriously prejudiced without
adequate hearing. Counsel submitted that a reading of the orders of
02.02.1998, 03.02.1998 and 20.02.1998 reveal that there was no
subsisting direction to attach or sell the suit property, and eventually
the position was confirmed by the order of the Company judge dated
22.05.1998. The learned Single Judge, argued Shri Govind,
erroneously interpreted these to imply that there was a subsisting
attachment.
18. When C.A. 127/2011 was moved by the Official Liquidator and
the appellant entered appearance, the Company Judge informed them
that the Court had not yet issued notices on the said applications and
in case the Court decided to pass orders which were adverse to the
interests of the appellants, appropriate notice would be issued to them.
The matter was taken up on 10.02.2011, when submissions made by
the parties were heard but no notice was given to the appellant DAL.
Thereafter on 04.04.2011, the learned company judge pronounced the
impugned order allowing the Official Liquidator‟s applications and
directing control and possession to be taken of the property at
Sikandra Road.
19. It was submitted that the observation of the Judge that Mr. G.S.
Suri had the power of attorney to deal with the property of DAL is
incorrect. The power of attorney was given by the erstwhile owners of
the said property in respect of their undivided shares, transferring it in
CO. APP.26/11 & CO. APPL. 27-29/11 Page 10
favour of Mr. Suri. The power of attorney did not empower him to
offer the property to meet the liabilities of the creditors. The General
Power of Attorney executed by the erstwhile owners of the property
on Sikandra Road authorized Mr. G.S. Suri to „do all acts and deeds
for effecting the transfer of share in favour of Delhi Automobiles'. It
further detailed that the GPA authorized the holder to execute a sale
deed between the owners and DAL.
20. Mr. Govind argued that in terms of provisions of the
Companies Act, the official liquidator is only empowered to take
control of the property of the company in liquidation and not another
party which is unconcerned with the liquidation. This contention has
not been addressed by the company judge. The property is owned
exclusively by DAL and no objection has been taken to the same by
the respondents.
21. Learned counsel further submitted that DAL had, under
mistaken advice, filed an appeal, C.A. No. 16/1998, claiming to be
aggrieved by the order of 2nd February, 1998, even though there was
no need to do so. That appeal was disposed by the Division Bench,
which granted liberty to DAL to seek review. The company
mistakenly sought review of the order; an amendment application too
was filed. They were, however, dismissed for want of diligence.
Counsel stressed that these developments are irrelevant and the actual
express terms of the orders in question amply clarify that there was no
attachment or encumbrance upon the suit property.
Respondents' contentions
22. It is argued on behalf of the Official Liquidator that the order
CO. APP.26/11 & CO. APPL. 27-29/11 Page 11
dated 04.04.2011 merely directed physical possession to be taken of
the property. The order which actually directed the attachment of the
property was the one dated 02.02.1998, which had attained finality.
The application filed by the Appellants for review of the order dated
02.02.1998 were dismissed for non-prosecution, as were the
applications filed for revival of the application. The appeal against the
order had been disposed off without any relief to the appellants.
23. Mr. Bahl, learned counsel for the Official Liquidator, submitted
that the present appeals are not maintainable as the appellants are, in
effect, challenging the order dated 02.02.1998 since the order dated
04.04.2011 is ancillary to the previous orders. The previous order is
both unambiguous and final. It was submitted that non-pursuance of
the orders of review and recall was not inadvertent but deliberate.
Counsel emphasized that the orders in question, made in 1998,
categorically stated that the property stood attached. The DAL was
aware of those orders; its attempts to have the order revisited, and also
to set them aside, clearly belied its contention that it was not bound by
it, or that the order could not affect its property. All legal avenues to
have the Court‟s orders nullified were themselves set at naught.
Consequently, it does not lie in the mouth of Taneja or DAL to say
that there was no attachment order. The non-prosecution of
applications by DAL was also deliberate.
24. It was argued no notice was required to be given of the
proceedings before the Company Judge as the appellants were fully
aware of it. In any case, there was no need to issue notice with regard
to the Liquidator‟s applications as they were in pursuance of the order
CO. APP.26/11 & CO. APPL. 27-29/11 Page 12
dated 02.02.1998, which had attained finality.
25. Counsel for the Official Liquidator submitted that on
03.02.1998, when Mr. G.S. Suri sought to withdraw the undertaking
made by him the previous day, the counsel for the Appellants sought
to delete that part of the order which related to the property at
Sikandra Road. However, the Company judge had pointed out that
those contentions would only take effect if an application for a review
of that order was made. DAL filed an application, C.A. No. 1508/98,
for review of the order dated 02.02.1998. Additionally, an application,
C.A. No. 1421/05, was filed for amendment of the review petition. On
13.08.2009, both these applications were dismissed for
non-prosecution. Subsequently an application, C.A.1242/09, for
revival of the said applications was also dismissed for
non-prosecution on 18.03.2010. The order directing the attachment of
the property at Sikandra Road thus stood and attained finality.
Accordingly, the property was thus not taken out of the purview of the
attachment order.
26. The Official Liquidator contends that the submission that Mr.
G.S. Suri had no authority to make the undertaking before the Court
also has to fail. These arguments should have been raised in the
review petition which was dismissed for non-prosecution. Reliance
placed on the decision in Shub Shanti Services v Manjula Agrawal
2005 (5) SCC 30 by the appellant, that in the absence of any specific
authority to the Chairman by the Board of Directors to act for and on
behalf of the Company, the assurance given by him to the respondents
would not create a binding legal obligation between the parties, as the
CO. APP.26/11 & CO. APPL. 27-29/11 Page 13
exercise was beyond the Articles and Memorandum of the company,
will also not apply for the simple reason that the agreement to sell
relied on by Taneja itself was unenforceable. In a decision of a 3
judge bench of the Supreme Court in Suraj Lamp & Industries Pvt
Ltd. v State of Haryana, (2012) 1 SCC 656 it was held, in the context
of the validity of SA/GPA/Will transactions, that Section 54 of the
Transfer of Property Act makes it clear that a contract of sale by itself
does not create an equitable interest in the property. Similarly, it was
held in Narandas Karsondas v S.A. Kamtam and Anr., (1977) 3 SCC
247, that ownership of a property only passes on the execution of
conveyance. The obligation that arises out of a contract of sale does
not amount to an interest or easement therein. Thus transfer of
immovable property by way of sale can only be by way of a sale deed,
which is stamped and registered. Any agreement to sell which is not a
registered deed of sale will not confer any interest in an immovable
property, except to the limited right granted under Section 53A of the
Transfer of Property Act. An agreement of sale with or without
possession is not a conveyance. The restraint order of the Single
Judge in the suit for specific performance regarding possession and
alienation of the property at Sikandra Road is only an injunction
which has been granted, and is not a decision on the merits of the
case.
27. DAL, it was argued, had attempted to create third party interest
in the matter by entering into an agreement of sale with Taneja
Developers and Infrastructure Limited, without informing them of the
encumbrance on the property in the form of the attachment order.
CO. APP.26/11 & CO. APPL. 27-29/11 Page 14
However, the application filed by Taneja Developers, C.A. No.
192/2011, for recalling the order of attachment on 02.02.1998 wherein
they had stated that they had not been informed of the encumbrance
on the property when they had entered into the agreement of sale, was
withdrawn on 10.02.2011 when they were given the liberty to
approach the Court once the matter in 161/97 for sale of the property
had been disposed of. However, no subsequent application had been
filed by the said Appellant. Here, Counsel argued that Kancherla
Lakshminarayana had no applicability. The Court had held there that
a person who files a suit on the basis of an agreement of sale could
not be held to be an utter outsider having no locus standi to take the
objections. It was further held that the question of whether the validity
of the agreement of sale and the question of whether it entitled the
appellant for specific performance on the basis of the agreement is a
question to be decided subsequently in the suit. However,
significantly, the contract for sale in that case was made in the context
of an agreement of sale entered into prior to attachment. The decision
was based on the judgment in Vannarakkal Kallalathil Sreedharan.
None of these cases relied on by the Appellants are applicable to the
facts of this case as the attachment occurred before, in 1998, whereas
the agreement to sell and the lease deed were entered into in 2002 and
2003 respectively. Thus, no valid third party interests have been
created, even if the Appellants are bona fide purchasers/ lessees
without notice of the encumbrance on the property.
28. Counsel relied on Western Press Pvt. Ltd. v. The Custodian
2000 (8) SCALE 159. There, a consent decree was obtained by the
CO. APP.26/11 & CO. APPL. 27-29/11 Page 15
parties by misleading the Court and assuring the existence of certain
facts. While recording the consent decree, the parties had undertaken
that in the event that sale of the property owned by Western Press was
sanctioned by the Court, the parties would hand over possession of the
property to the purchaser. In the execution proceedings, Western
Press claimed that it was not a party to the proceedings, was not given
notice, was not a judgment- debtor or a surety and that the
undertaking given on its behalf was unauthorised. However, the Court
held that this would not be a ground for allowing the execution
proceedings of the consent decree to be questioned on the basis of
different facts that have been withheld from the court. A factor that
was instrumental in this decision was the fact that Western Press, the
appellant company and the judgement debtor company were both
controlled by the same family.
Analysis & Findings
29. This Court is called upon to decide the correctness of the view
of the learned Company judge, in the impugned order, that the suit
property was subject to attachment, and consequently, was under
control of the Official Liquidator, who in turn wished to put it to sale.
30. Indisputably, winding up proceedings were pending in respect
of GAL. On 02.02.1998, to stave off an imminent winding up order,
Shri G.S. Suri, Managing Director of DAL made a statement, i.e. an
undertaking to the Company Court. The terms of this undertaking are
important - he stated that DAL owned the suit property which was
valuable and that efforts were on to sell it, and that in the event of
sale, the proceeds were to be utilized to liquidate GAL‟s liabilities.
CO. APP.26/11 & CO. APPL. 27-29/11 Page 16
On 03.02.1998, he sought to resile from that statement. The Company
Court, on that date, recorded as follows:
"3.2.1998 Present: Ms Kajal Chandra, Mr S.K.
Sharma, Mr A.K. Sikri, Mr. Amitabh
Narayan, Ms Anjajli sharma, Mr. Rajeev
Nanda, Advocates, for the petitioners in
their respective petitions.
Mr Ravinder Sethi, Senior Advocate, with
Mr D.R. Mahajan, Ms. Kamlesh Mahajan
and Mr. Girdhar Govind for the respondent.
C.P. No. 161/ 97 & C.A. 384/ 97: (with CPs. 320/96,
99/97, 100/97, 101/97, 110/97 120/97, 140/07, 157/97,
163/97, 164/97, 167/97, 293/97, 366/97, 404/97, CCP 21/
97 & CCP 17/ 97).
The statement of Mr. G. Sagar Suri was recorded on
February 2, 1998. However, the statement has not been
signed by him. It has been mentioned by the learned
counsel for the respondent that Mr G. Sagar Suri was as
actually not authorized to make any statement on behalf of
M/s. Delhi Automobiles Ltd. with regard to 1, Sikandra
Road, New Delhi, as he had not gone to the Board for an
authorization from them in this behalf. It is unfortunate
that on February 2, 1998 this was not the position taken
by Mr G. Sagar Suri. He had categorically stated that he
was authorized to make a statement on behalf of M/s.
Delhi Automobiles Ltd. Learned counsel for the
respondent also submits that the order pertaining to
taking over of 1 Sikandra Road in the event of it being not
sold in three and a half months should be deleted from the
order dated February 2, 1998 as the property belongs to
M/s. Delhi Automobiles Ltd. which is not a party before
the Court. The prayer of the respondent can be
considered only when a proper application is filed by the
CO. APP.26/11 & CO. APPL. 27-29/11 Page 17
respondent for review of the order dated February 2,
1998.
List the matter on the dates already fixed.
Sd/-
February 3, 1998.
Anil Dev Singh, J."
On the next date of hearing, i.e. 20.02.1998, the Court made the following
order:
"Present: Ms. Kajal Chandra, Mr. A.K. Sikri, Mr.
Amitabh Narayan, Ms. Anjali Sharma, Mr. Rajeev
Nanda, Mr. P.K. Mittal, Mr. Rana Ranjit Singh,
Advocates, for the petitioner in their respective petitions.
Mr. Ravinder Sethi, Sr. Advocate with Mr. D.R. Mahajan
and Ms Kamlesh Mahan, for the respondent.
C.P. Nos. 161/ 97 & C.A. 384/ 97 & C.A. 279/ 98:
(with C.Ps 320/ 96, 99/ 97, 100/ 97, 101/ 97, 110/ 97,
120/ 97, 140/ 97, 157 /97, 163/ 97, 164/ 97, 167/ 97, 293/
97, 366/ 98, 404/ 97 & CCP 21/ 97), CCP 17/ 97, CCP
4/98, CP 65/ 97, 249/ 97.
Learned Counsel for the respondent states that he is
conscious of the fact that the respondent had given an
undertaking in certain cases, to make the payment to the
petitioners within a particular period of time and the
same could not be carried into effects because of
financial difficulties which are being faced by the
respondent. He further states that he is also conscious of
the fact that the Chairman of M/s. Delhi Automobiles on
2nd February, 1998, had made a statement in this court
that he had authority to state on behalf of M/s. Delhi
Automobiles Limited that efforts were being made to sell
the property of M/s. Delhi Automobiles located at 1,
CO. APP.26/11 & CO. APPL. 27-29/11 Page 18
Sikandara Road, New Delhi so that the liability of M/s.
Ganga Automobiles Limited towards its creditors could
be liquidated but on 3rd February, 1998 the Chairman of
M/s. Delhi Automobiles Limited had stated that he did
not have the authority of the Board to make any
statement with regard to 1, Sikandara Road, New Delhi.
Learned counsel further states that despite the
circumstances which are against the respondent, he
would pray that the respondent be given an opportunity
till 21st of May, 1998 to make the payment to all the
creditors who are before this Court and in the event of
the payments not being made by the said date, the
Company be deemed to have been wound up and the
Official Liquidator attached to this court be deemed to
have been appointed as the Liquidator of the Company.
Learned counsel for the petitioners have no objection to
the passing of the order of deemed winding up in the
light of the submission of learned counsel for the
respondent.
Having regard to the statement of learned counsel
for the respondent and learned counsel for the
petitioners, I am of the view that the submission of Mr.
Sethi, learned counsel for the respondent, with regard to
the deemed winding-up of the company, should be
accepted. Accordingly, it is directed that in case the
admitted liability of the creditors who have filed petitions
in this Court is not discharged by the respondent before
21st May, 1998, the Company will be deemed to have
been wound-up and the Official Liquidator attached to
this Court will act as the Liquidator of the Company.
Mr. Mahajan, learned counsel for the respondent
has presented in Court the statement of account of the
Company as on 31st March, 1996. Let the same be taken
on record. Mr Mukhinder Singh, director of M/s. Ganga
Automobiles will also file the statement of account of the
Company upto-date within three weeks. Mr Mukhinder
CO. APP.26/11 & CO. APPL. 27-29/11 Page 19
Singh shall also disclose the names of the Directors of
M/s. Ganga Automobiles. Such of the Directors who have
given personal guarantee will file list of all their assets.
Mr. Sethi prays that in view of his statement that
M/s. Ganga Automobiles will liquidate its liability to the
creditors by 21st May 1998 and in case that is not done
the company will be deemed to have been wound up, the
order dated 2nd February, 12998 be modified.
Having regard to the statement of Mr. Sethi,
learned counsel for the respondent, the following lines of
the order dated February 2, 1998, will not have effect till
the next date:
"In case the property No.1, Sikandra Road, New Delhi is
not sold within a period of three and half months and the
amounts which are due to the creditors, who are before
this Court are not paid off or any other favourable
arrangements securing the monies of the creditors is not
reached within the above said period from today, the
property No.1, Sikandra Road, New Delhi will be deemed
to have been attached and will be sold under the
supervision of the Court."
List the matter on 21st May, 1998.
A copy of this order be placed in the files of the
connected matters.
Sd/-
February 20, 1998 Anil Dev Singh, J."
31. On the next date of hearing in the winding up petition, i.e
22.5.1998, the Court made the following order:
"Mr Kapil Sibal, learned senior counsel appearing
CO. APP.26/11 & CO. APPL. 27-29/11 Page 20
for the respondent, states that at this stage without
insisting for the variation of the order dated February
20, 1998, his client will deposit a sum of Rs.610 lakhs for
being disbursed to the petitioners in the following
manner :-
On or before Amount (lacs)
15.07.98 40.00
14.08.98 40.00
30.09.98 40.00
31.10.98 100.00
30.11.98 140.00
31.12.98 250.00
610.00
Mr. Sibal also states that in case of default in the
payment of any of the above installments, it will be open
to the court to appoint the Official Liquidator as the
Provisional Liquidator of the Company.
Besides the above statement, learned counsel for
the respondent submits that the dispute between M/s.
Gujarat Lease Financing Ltd. and the respondent
company with regard to the question of liability could be
resolved by appointing a Chartered Accountant to go
into the question as to whether liability of the respondent
towards the petitioner is Rs.4.60 crores or is Rs.17 lakhs.
He further submits that the dispute between M/s. Goyal
MG Gases Limited and the respondent stands referred to
an arbitrator. Learned counsel also submits that the
dispute between M/s. Poysha Oxygen Pvt. Ltd. and the
respondent has also been referred for arbitration.
Learned counsel for the respondent says that the liability
of the respondent towards M/s. Rajeev Goel Architects
Pvt. Ltd. will be notified to petitioner. He states that the
respondent will calculate the interest payable to each of
the petitioners on the admitted rate of interest and will
file a schedule of payment. Learned counsel for the
CO. APP.26/11 & CO. APPL. 27-29/11 Page 21
respondent submits that Mr. Mukhinder Singh, a director
of the respondent company, will give a statement that he
will abide by the statements and undertakings given on
behalf of the respondent, and in the event of the breach of
the payment schedule, he will be personally liable for the
consequences arising from such a breach.
Mr. Sibal states that Mr. Mukhinder Singh is
present and is willing to make a statement to the above
effect. Let the statement of Mr. Mukhinder Singh be
recorded.
Sd/-
May 22, 1998 ANIL DEV SINGH, J.
Statement of Mr. Mukhinder Singh has been recorded. Learned counsel for the petitioners submit that Mr. Mukhinder Singh be asked to furnish the details of his immovable properties. They state that they would be praying that an order restraining Mr. Mukhinder Singh from selling his properties be passed. Mr. Sibal, learned counsel for the respondent, states that Mr. Mukhinder Singh owns twenty-seven acres of land at Dabala Kalan, Fazilka, District Ferozepur. He submits that Mr. Mukhinder Singh is a non-functioning Director and his personal properties cannot be subject of a restraint order in these proceedings. This position is disputed by the learned counsel for the petitioners. The parties may address their arguments on this aspect of the matter on the next date. However, till the next date Mr. Mukhinder Singh is restrained from selling the above said property.
Having regard to the submissions of the learned counsel for the parties, I am of the view that the order dated February 20, 1998 needs no variation. It is clarified that the statements and undertakings made by the learned counsel for the respondent apply to the petitions which have been filed before February 20, 1998.
CO. APP.26/11 & CO. APPL. 27-29/11 Page 22 List the matter on July 16, 1998. In the meanwhile, it will be open to the learned counsel for the parties to submit the names of the Chartered Accountants.
A copy of this order be kept in the concerned matters.
Sd/-
Anil Dev Singh, J.
May 22, 1998"
32. On 18.08.1998, the Company judge, in an elaborate order, recounted the previous orders whereby DAL‟s Mr. Suri, on 2nd February, 1998 made a statement that it had immovable property, namely, 1, Sikandra Road, New Delhi, which was valuable and that efforts were being made to sell this property and in case the property was sold, the money would first be utilized for meeting the amounts due to the creditors who filed petitions in this Court. Mr. Mukhinder Singh, Director of GAL, too made a statement. The Court noticed that the order itself recorded that in case the property No.1, Sikandra Road, New Delhi was not sold within 3 ½ months and the amounts due to the creditors were not paid or any other favourable arrangement securing the monies of the creditors not reached within the said period, the No.1, Sikandra Road, property would be deemed to have been attached and would be sold under the supervision of the Court. The Court then noted the subsequent stance of Mr. G. S. Suri, through an application for review, and noted that it was taken up on 3rd February, 1998 and thereafter the case was adjourned to 20 th February, 1998. The Court then, in its order of 18th August, 1998, stated that:
CO. APP.26/11 & CO. APPL. 27-29/11 Page 23 ".....................The proceeding of 20th February, 1998 show that the counsel, appearing for the respondent company, Mr. Ravinder Sethi, Senior Advocate made a statement that despite the circumstances against the respondent company an opportunity till 21st May, 1998 for making the payment of all the creditors (who are before this Court) be given and in the event of the payment not being made by the said date, the company be deemed to have been wound up and the Official Liquidator attached to this Court be deemed to have been appointed as the Liquidator of the company. To this statement of counsel for the respondent, petitioners expressed no objection for passing of the order of deemed winding up. Accordingly, having regard to the statement of counsel for the respondent company and of the petitioners, this Court passed the order if the liability or the debts of the Creditors who filed petition before this Court was not discharged by the respondent company before 21st May, 1998, the company would be deemed to have been wound up and the Official Liquidator attached to this Court would act as the Liquidator of the Company. It was in this background that the order of attachment and sale of the property bearing No.1, Sikandara Road, New Delhi was kept in abeyance till 21 st May, 1998. Mr. Kapil Sibal, Senior Advocate appearing for the respondent company without insisting on the variation of the order dated 20th February, 1998 made a statement that his client would deposit a sum of Rs.610 lakhs for being disbursed to the petitioners........................."
33. The Court, very pertinently, stated that GAL failed to honour the commitment made by it, as recorded in the order dated 18.08.1998:
"..............(In)Pursuance to the statement of counsel for the respondent company and the undertaking given by CO. APP.26/11 & CO. APPL. 27-29/11 Page 24 Mr. Mukhinder Singh, Director of the respondent company, this Court ordered Liquidator not to take over the assets of the company till the next date. At the same time this court made it clear that the Official Liquidator would not cease to be the Liquidator of the company.
The respondent company failed to adhere to the schedule of payment given to this Court on 22 nd May, 1998. Thus the breach has been committed by the respondent as well as by its Director in adhering to the schedule of payment. The order of restraining the Official Liquidator from taking possession was kept in abeyance till the next date. Now even after three months of the said order the respondent company has not been able to pay even the first installment as committed to this Court vide order dated 22nd May, 1998. On the last date of hearing, the respondent company paid a sum of Rs.15 lakhs in this Court vide two cheques. Today again another cheque of Rs.5 lakhs has been deposited in this Court. Thus, as against two installments which have become due amounting to Rupees eighty lakhs, the respondent company has been able to pay only twenty lakhs. There is thus a breach in the undertaking given by the respondent company through its counsel as well as of its Director, Mr. Mukhinder Singh. This court vide order dated 22nd May, 1998 made it absolutely clear that in case there would be a breach of the payment schedule the deemed winding up order would come into operation and the Official Liquidator appointed as Liquidator of the company would take over the assets of the company as well as of the Director, Mr Mukhinder Singh who had by his undertaking made himself personally liable for the consequences arising from such a breach.
Since there is a deemed winding up order operating against the respondent company and the Official Liquidator attached to this Court was appointed as the Liquidator of this Company, the said order was CO. APP.26/11 & CO. APPL. 27-29/11 Page 25 kept in abeyance from time to time to enable the respondent company to pay up its debts. Number of opportunities were given to the respondent company to adhere to the schedule of payment as given by it before this Court on 22nd May, 1998. But the respondent company has faulted and thus committed a breach of the same. Therefore, in these circumstances there is no alternative but to hold that respondent company stood wound up and the Official Liquidator attached to this court who was appointed as Liquidator of the company to take into custody and possession the assets, effects and records of the respondent company as well as the assets moveable and immovable of Mr. Mukhinder Singh, Director of the respondent company, who made himself personally liable for the consequences arising from such a breach. Necessary communication may also be sent to the Registrar of Companies. Notice in the prescribed form for making the order be published in the newspaper "Statesman" (English edition) as well as "Jan Satta"
(Hindi edition). Copy of the order be sent to the Official Liquidator. Registrar is directed to draw up notification and formal order as prescribed under the rules.
XXXXXX XXXXXX XXXXXX Counsel for the petitioners contend that in view of the order passed on 20th February, 1998, the property bearing No.1, Sikandara Road, New Delhi which was attached to be sold under the supervision of this Court, be ordered to be sold. To this, Mr. Girdhar Govind states that he would like to address arguments. According to him his review application has yet not been disposed of. On his request, adjourned to 10th September, 1998."
34. What is immediately apparent from the series of orders, quoted above, (dated 02.02.1998, 03.02.1998, 20.02.1998, 22.05.1998 and 18.08.1998) is that:
CO. APP.26/11 & CO. APPL. 27-29/11 Page 26 (a) Shri G.S. Suri unequivocally stated that DAL would commit
the suit property, i.e. No. 1 Sikandra Road and sell it; the proceeds were to be used to liquidate GAL‟s outstanding liabilities;
(b) On 03.02.1998, Shri G.S. Suri sought to resile from the undertaking, stating that he did not have the authorization to commit the suit property in the manner that he did previously. However, the Court did not relieve the undertaking.
(c) Subsequently, a review petition for recall of the order dated 02.02.1998 was filed. However, the said order was never varied.
(d) The orders of 20.02.1998 and 22.05.1998 would reveal that GAL sought to buy time to discharge its liabilities, and consequently, the previous orders were kept in abeyance with the condition that in the event the payment schedule indicated to the Court were not adhered to, it would face a deemed winding up order.
(e) On 18.08.1998, the Court did in fact record the failure of GAL to pay off its creditors, and directed that the winding up order made in a preemptory manner should operate. The counsel for DAL in the present appeals, Shri Girdhar Govind, sought time to submit that the order of 02.02.1998 ought to be reviewed.
(f) The consequence of the previous orders, especially the order of winding up in a peremptory manner, (which was part of the composite order made on 22.05.1998) has not been disputed. Equally, the order sheet in the company winding up proceedings reveal that the attachment of the suit property was never vacated or modified.
(g) The review petition and a subsequent application for CO. APP.26/11 & CO. APPL. 27-29/11 Page 27
amendment, made by DAL were rejected. Its effort to revive those applications were also unsuccessful. It had earlier appealed unsuccessfully against the order of 02.02.1998 to the Division Bench.
35. In the opinion of the Court, the above sequence of events, especially the orders of the Court negate Taneja and DAL‟s submission that the attachment order cannot bind them. These facts show that the attachment order was not subsequent to the agreement to sell and the lease agreements (which were in 2002 and 2003) but rather, before them, having been made in 1998. The reliance on the observations made in Vannarakkal Kallalathil Sreedharan; Rajender Singh and Kancherla Lakshminarayana (supra) are consequently of no avail. In all those decisions, the attachment of the property was subsequent to the contracts by which the owners had agreed to sell the property. Here, the fact situation is to the contrary - the attachment order had been made in 1998 and continued in force. The attachment order, therefore, clearly prevailed.
36. So far as the argument that DAL, not being a party to the winding up proceeding, and not having consented to the arrangement whereby its property could be made the subject matter of such proceeding, is concerned, apart from the sequence narrated earlier, which establishes beyond any controversy that its efforts to have the attachment vacated were fruitless, (resulting in consequent finality to that aspect) - even otherwise, it can no longer contend that its director, Shri Suri had no authority to make the statement. A near identical situation had arisen before the Supreme Court, in Western Press (supra); the Court repelled a similar argument on behalf of the CO. APP.26/11 & CO. APPL. 27-29/11 Page 28 third party in the following terms:
"...learned senior counsel appearing for the appellant, strenuously contended, while reiterating the stand taken before the Special Court, that the appellant is an utter third party to the proceedings before the Special Court it being neither a notified party nor claiming through any of the parties and, as a fact, also not having been arrayed as one such, its properties cannot be made liable for the recovery of the dues in question. It is also further contended that neither the appellant gave any undertaking nor it stood as surety for the realisation of the amount secured in the minutes of the order dated 5.7.95 and, therefore, cannot be said to have encumbered its property by any specific thing in writing and the undertaking, if any, given on its behalf is not only an unauthorised one not binding upon the appellant but that it has been given also under a mistaken view of facts and, therefore, the same could not adversely affect the rights of the appellant......learned counsel for the Custodian, while drawing inspiration from the reasoning of the Special Court, endeavoured to sustain the conclusions arrived at by the Special Court. It is the contention of the learned counsel that the very object of the consent order passed on 5.7.95 was to effectively ensure the recovery of the dues and it is too late in the day to retrace steps to disown responsibility and liability in this regard..
XXXXXXXXXXX XXXXXXXXXXXX ....We have carefully considered the submissions of the learned counsel appearing on either side. In our view, apart from the lack of merits in the challenge made to the well considered order of the Special Court, the appellants case does not merit countenance in our hands for another reason also. The parties before the Special Court having consented and invited the Court to pass the order dated 5.7.95 and obtained benefits by giving undertaking of their own and on behalf of the CO. APP.26/11 & CO. APPL. 27-29/11 Page 29 appellant-company, ought not to be allowed to take shelter under technicalities to overreach the Court, which believed the parties and counsel appearing on their behalf and acted in good faith by accepting the terms suggested by the parties themselves.
XXXXXXXXXXX XXXXXXXXXXX On a careful consideration of the events which occurred before the Special Court which made the said Court to believe the existence of certain facts on the representations made before it, the orders passed and the affidavits found and noticed to have been filed from time to time before the Special Court, the Special Court could not be either faulted for its conclusions or that the specific findings arrived at that the consent order dated 5.7.95 taken together with the affidavit of undertaking dated 28.7.95 covered within its fold the property of the appellant-company in question for being proceeded against in execution of the decree passed for recovering the amount due as declared in the consent order dated 5.7.95, could not be said to be vitiated in any manner warranting our interference. Consequently, it would be permissible for the Custodian to proceed against the property comprised in Units 3 and 4 belonging to the appellant- company also by means of an appropriate execution application as and when he choose to do so. The plea of lack of authority in Milan B. Dalal to bind the appellant needs mention only to be rejected even for the simple reason that the Directors of the appellant-company, who allowed Milan B. Dalal a free hand as Chairman of the appellant- company to deal with the matter, cannot be permitted to blow hot and cold as it suits them. Equally untenable is the pretended mistake of fact which, in our view, is nothing but a self-serving attempt found to be made as a pure afterthought to wriggle out of the lawful commitments made and retrace the position in which the Directors of the company have allowed themselves to be landed CO. APP.26/11 & CO. APPL. 27-29/11 Page 30 in.....On the other hand, the terms as well as the tenure of the above proceedings make clear the dominant intention and purpose of them to be merely an undertaking given by a third party to the proceedings to the Court to abide by a particular course of action if the judgment-debtor fails to satisfy the decree. Even in cases of such default by the judgment-debtor in this case, the undertaking as well as the consent decree only enables the Custodian to initiate execution proceedings against the properties in question of the appellant- company and it is only in the event of such sale, the question of coming into existence any document which would require compulsory registration under Section 17 of the Act would arise and not at this stage. In substance and effect what has been undertaken to the Court is to preserve the properties intact for being proceeded against in a given eventuality and deliver peaceful possession of the property in the event of such action becoming necessary. Declaration or undertaking conceding such liberty of action cannot be construed to fall under clause (b) of Section 17 (1) of the Registration Act...."
37. For the above reasons, the contentions of both appellants (i.e Taneja and DAL) that the attachment order was not binding, in the circumstances of the present case, are held to be meritless and are consequently rejected.
38. Before disposing off the appeals, it would be necessary to deal with some applications filed during the pendency of the proceedings. On 27.02.2012, in respect of the Company Winding-up Petition (Co. Pet. 161/1997) Rocksmelt Co., the original petitioner, claimed that it had arrived at a settlement with GAL and was withdrawing the petition in view of the development. However, counsel for the Official Liquidator argued that no settlement could be made after the Court CO. APP.26/11 & CO. APPL. 27-29/11 Page 31 had already ordered the company to be wound up. The Company Court agreed with the objections of the Official Liquidator and held the settlement to be impermissible. The proprietors of Rocksmelt were directed to deposit the amount admitted to having been received by them with the court. The Court is not seized of the appeal against that order and it only observes that the said petitioner is permitted to approach the learned Single Judge for a review or modification of the order.
39. C.M. No. 311/2012 is an application filed by the Official Liquidator seeking directions against the respondents who were the legal heirs of Mr. Mukhinder Singh, who had given an undertaking to be personally liable for the non-compliance with the payment schedule to be adhered to by GAL. The Judge, while ordering issuance of notice to the respondents impleaded in the application, ordered attachment of the land belonging to the late Mr. Singh. Again, this Court does not propose to deal with the said order, as no appeal has been preferred against it.
40. M/s Poysha Oxygen Pvt. Ltd. and Goyal MG Gases Pvt Ltd have sought impleadment under Order 1, Rule 10 CPC read with Rule 101 of the Companies (Court) Rules, 1959 in Company Appeal 27/2011. The Applicants are creditors of GAL, and had initiated arbitral proceedings which had resulted in an award being passed against GAL on 31.07.2000. This arbitral award was not challenged by GAL and had attained the status of a decree. In a judgment dated 30.07.2009, the award was modified by the High Court in O.M.P. 126-127/2001, which made the award-cum-decree executable not only CO. APP.26/11 & CO. APPL. 27-29/11 Page 32 against GAL but also against the guarantors of the loans taken by it. The guarantors have challenged the judgment, but not the award. During the pendency of the arbitral proceedings, the order for winding up had been made by the Court in C.P. 161/1997. The applicants are seeking to be substituted in place of Rocksmelt or impleaded as a petitioner in C.P. 161/1997, since the latter claimed withdrawal of their petition. It is contended that winding up proceedings once admitted are for the benefit of all the creditors.
41. This Court is of the opinion that since the application of Rocksmelt has not been accepted, the question of impleadment of the present applicants in these appeal proceedings does not arise. Their remedy of pressing the claims before the Official Liquidator, as decree holders, survives, and can be availed in accordance with law. It is open to them to seek impleadment or such other remedies as are available to enforce their claims, in accordance with law. The application is disposed off in these terms.
42. In view of the above discussion, the appeals have to fail and are dismissed. All pending applications are disposed off. There shall be no order on costs.
S. RAVINDRA BHAT (JUDGE) G.P. MITTAL (JUDGE) AUGUST 22, 2013 CO. APP.26/11 & CO. APPL. 27-29/11 Page 33