Delhi High Court
Late Mrs. Mohini M Assomull And Ors (Ph) vs Union Of India And Ors on 22 March, 2024
Author: Dharmesh Sharma
Bench: Dharmesh Sharma
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Order reserved on : 8th February , 2024
Order pronounced on : 22nd March, 2024
+ CO.A(SB) 36/2011 & CO.APPL. 3087/2016, CO.APPL.
4209/2016, CO.APPL. 56/2017, CO.APPL. 92/2017,
CO.APPL. 267/2017, CO.APPL. 357/2017, CO.APPL.
850/2017, CO.APPL. 1486/2017, CO.APPL. 1618/2017,
CO.APPL. 84/2018, CO.APPL. 540/2018, CO.APPL.
1190/2018, CO.APPL. 360/2022, CO.APPL. 361/2022,
CO.APPL. 678/2022 and CO.APPL. 362/2022
GREENFIELD RESIDENTS WELFARE ASSOCIATION
..... Appellant
Through: Mr. Arun Srivastava, Adv.
versus
UNION OF INDIA & ORS ..... Respondents
Through: Mr. Rakesh Kumar, CGSC with
Mr. Sunil and Mr. Satyanand
Kumar, Advs. for UOI/R-1
Mr. Anshuman Mehrotra and
Mr. Sunny Khandelwal, Advs.
FOR Intervenor RWA/Awasiye
Sudhar Mandal
Mr. Rohit Gandhi, Mr. Hargun
Singh Kalra and Mr. Surrender
Sheoran, Advs. for applicant
CA No. 678/2022
Mr. D.S. Chauhan, Ms. Ruchi
Singh, Mr. Prashant Kumar,
Mr. Shiker Badial and Mr.
Sanbtosh Kumar Baitha, Advs.
Mr. Shekhar Raj Sharma, Dy.
AG Haryana and Ms. Akshaya
Jebakumar, Adv. for MCF and
DTCP
+ CO.A(SB) 37/2011 & CO.APPL. 329/2013, CO.APPL.
847/2013, CO.APPL. 2200/2013, CO.APPL. 1234/2014,
CO.APPL. 1484/2017, CO.APPL. 672/2018
Signature Not Verified
CO.A(SB) 36/2011; 37/2011 &
Digitally Signed By:PRAMOD 79/2011 Page 1 of 39
KUMAR VATS
Signing Date:22.03.2024
18:49:18
GREENFIELD PLOTHOLDERS CUM- RESIDENTS ASSOC.
(PH) ..... Appellant
Through: Mr. Pradeep Aggarwal, Mr.
Arjun Aggarwal and Mr.
Bhaskar Aditya, Advs.
versus
URBAN IMPROVEMENT COMPANY (P) LTD & ORS.
..... Respondents
Through: Mr. Rakesh Kumar, CGSC with
Mr. Sunil, Adv. for UOI
Mr. Arun Srivastava, Adv. for
R-4
Mr. D.S. Chauhan and Ms.
Ruchi Singh, Advs.
+ CO.A(SB) 79/2011 & CO.APPL. 1716/2013, CO.APPL.
2765/2014, CO.APPL. 1487/2017, CO.APPL. 1137/2018,
CO.APPL. 1473/2018, CO.APPL. 1474/2018, CO.APPL.
102/2019, CO.APPL. 592/2019, CO.APPL. 601/2019,
CO.APPL. 1024/2019, CO.APPL. 109/2020, CO.APPL.
574/2020, CO.APPL. 691/2020, CO.APPL. 69/2021,
CO.APPL. 70/2021, CO.APPL. 142/2021, CO.APPL.
935/2023, CO.APPL. 157/2024
LATE MRS. MOHINI M ASSOMULL AND ORS (PH)
..... Appellants
Through: Mr. Saurabh Kirpal, Sr. Adv.
with Mr. Dushyant Manocha,
Ms. Anannya Ghosh, Ms.
Chitra Vats, Mr. Brian Henry
Moses, Ms. Mrinalini Mishra,
Ms. Doel Bose, Ms. Mrinalini
and Ms. Kashish Cahhabra,
Advs.
versus
UNION OF INDIA AND ORS ..... Respondents
Through: Mr. Rakesh Kumar, CGSC with
Mr. Sunil, Adv. for UOI/R-1
Mr. Pradeep Aggarwal, Mr.
Arjun Aggarwal and Mr.
Signature Not Verified
CO.A(SB) 36/2011; 37/2011 &
Digitally Signed By:PRAMOD 79/2011 Page 2 of 39
KUMAR VATS
Signing Date:22.03.2024
18:49:18
Bhaskar Aditya, Advs. for R-6
Mr. Arun Srivastava, Adv. for
R-7
Mr. D.S. Chauhan and Ms.
Ruchi Singh, Advs.
CORAM:
HON'BLE MR. JUSTICE DHARMESH SHARMA
ORDER
CO.A(SB) 79/2011; CO.A(SB) 36/2011 & CO.A(SB) 37/2011
1. This batch of appeals have been preferred by the aforesaid appellants on various grounds, that would be discussed hereinafter, under Section 10F of the Companies Act, 1956, assailing the impugned order dated 24.05.2011, passed by the Company Law Board1, whereby the petition bearing CP No. 50(ND)/2006 was disposed of along with applications being CA No. 23/2009, CA No. 55/2009 and CA No. 105/2009.
FACTUAL BACKGROUND:
2. The facts giving rise to the instant appeals are that M/s. Urban Improvement Company Pvt. Ltd. (hereinafter ‗the Company' as also ‗UICPL') was incorporated to do business in real estate with the primary obligation of development of land at Faridabad, State of Haryana, whereat a large chunk of land was bought and plots were allotted to different plot-holders at the rate of Rs. 12 per sq.yd, including development charges and the said colony was named ‗Greenfields Colony' in Sector 41-43, Faridabad and the project 1 CLB Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 3 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 encompassed land measuring 438 acres. In the background of certain allegations of large-scale financial irregularities by the promoters/directors coming to the fore in the year 1976, a Show Cause notice dated 06.02.1976 was issued by the Union of India (Ministry of Corporate Affairs) to the board of Directors of the Company, and thereafter, an order was passed by the Company Law Board dated 23.06.1976 vide which the existing board of Directors of the company were substituted by the directors appointed by the Central Government. Such appointment of Directors by the Central Government has been carried out every three years subject to the approval of the Company Law Board since apparently the Directors and shareholders literally abandoned the company and the said practice continued till 2009.
3. An order dated 29.10.1982 came to be passed by the Department of Company Affairs, Company Law Board, wherein it was directed that the property of the company was to be disposed of by public auction after giving due public notice and on sufficient publicity of the same by the company. The said order was passed in the background that it was noticed that the Directors of the company were disposing of the property of the company in a clandestine manner and to the prejudice of the company. It has been alleged by the applicants in CO.A(SB) No. 36/2011 viz., Greenfields Resident Welfare Association, that between 1982 and 2008, a substantial portion of the Company's land was sold by means other than public auction.
Signature Not VerifiedCO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 4 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18
4. In the interregnum, the Union of India (Ministry of Corporate Affairs) filed C.P. No. 50/2006, seeking extension of the term of the three Directors appointed to the board of the company. The same came to be approved by the Company Law Board vide order dated 09.08.2006, whereby the appointment of five Directors was permitted.
5. It is also borne out from the record that certain plots (48 Residential +1 for Cinema Complex) were advertised for sale by the then Board of Directors through the process of a tender on 13.12.2008 and such sale of plots was sought to be stayed by M/s. Greenfields Plot Holders-cum-Residents Association by way of an application being C.A. No. 23/2009 in C.P. 50/2006. The Company Law Board passed an order on 13.01.2009, whereby the company was directed to maintain status quo with respect to the plots advertised for sale. It is however stated that intimation letters were sent on the same date i.e., 13.01.2009, to the successful bidders in respect of the advertised plots. Thereafter, the company further advertised the sale of certain institutional plots on 24.01.2009 which advertisement was also sought to be stayed, through an application filed before the Company law Board bearing C.A. No. 55/2009.
6. During the pendency of the above stated applications, an application, being C.A. No. 105/2009, came to be filed under Regulation 44 of the Company Law Board Regulations, by certain persons claiming to be the shareholders of the Company, who sought various reliefs with respect to the running of the affairs of the Company. It was prayed therein that the Directors appointed by the Central Government be removed from the board of Directors of the Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 5 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 company and that an Extraordinary General Meeting of the shareholders of the company be convened. Further, it was sought that the Central Government be prohibited from taking any further steps to appoint Directors and that the present board of Directors be restrained from disposing of, alienating, encumbering or creating any third-party rights with respect to any of the properties/assets of the company. Amongst certain other reliefs, it was also prayed that the sale/auction of residential/institutional plots of the company be cancelled and that steps taken pursuant to the same be set aside. A reply to the said application was also filed by the Greenfields Residents Welfare Association on 04.09.2009.
7. The above-noted applications - C.A. No. 23/2009, 55/2009 and 105/2009, along with the petition bearing C.P. No. 50/2006, came to be disposed of by the common impugned order dated 24.05.2011 and the same has been challenged in the instant appeals. Suffice to point out that the CLB vide the impugned order has directed the appointment of two Additional Directors besides enjoining upon the Union of India (Ministry of Corporate Affairs) to appoint a Whole Time Director to the Company for a period of three years under Section 408 of the Companies Act, 1956.
GROUNDS OF CHALLENGE BY THE APPELLANTS:
8. It may be reiterated that there has been active intervention at the behest of the three Resident Welfare Associations in this prolonged litigation. Each lament that the development work at the site has been very pathetic so much so that it lacks basic amenities, electricity supply is insufficient and even the boundary walls and gates to the Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 6 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 society require construction besides non development of the common areas like parks etc.
9. The appellant in CO.A.(SB) - 36/2011-Greenfields Residents Welfare Society (wrongly stated as Greenfields Residents Welfare Association in the proceedings before the CLB), is a registered Society set up with the responsibility of looking after the interests of the residents. It has been stated by the appellants that the primary challenge to the impugned order dated 24.05.2011 put forth is that the Additional Directors appointed by the Company Law Board, are the very people who were the former directors of the Company and were ousted earlier on the allegations of widespread financial and fiduciary irregularities. The impugned order has been challenged on various grounds, which are now not relevant as such.
10. The appeal bearing No. CO.A.(SB) - 37/2011 has been filed by Greenfields Plot Holders-cum-Residents Association, whose primary objection was regarding the individuals appointed as the Additional Directors. It is urged on behalf of the appellants herein that the shareholding of the company is in dispute and various litigations are pending currently for the determination of the shareholding of the company, so much so that the shareholders are yet to find a place in the Register of Members.
IMPUGNED ORDER OF THE CLB:
11. It would be relevant to reproduce the operative portions of the impugned order dated 24.05.2011 by the CLB, which is under challenge in the instant appeal under section 10 F of the Act, that read as under:
Signature Not VerifiedCO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 7 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 ―15. The Applicants' C.A. Nos. 23, 55, 105 and other C.As. contain an elaborate statement of the charges against the directors. In the instant case CLB has to regulate the future conduct of the company for providing against recurrence of such abuses of power as to what is the nature of the complaint and how the same has to be rectified. It is the interest of the Company and the public that is being considered and not the individual dispute between the petitioner and the respondents. It is settled law that under the inherent powers, the CLB can pass any order to prevent the abuse of process and also to meet the ends of justice. Answer to the question whether a board of directors could be reconstituted by the CLB, or not is in the affirmative. Some limitations have been placed on the Government's powers while there are no limitations or restrictions on the CLB's powers to pass orders that may be required for bringing to an end the matters complained of and to see that the affairs of the Company are not being conducted in a manner prejudicial to public interest in future. The only power with the Central Government under section 408 is the power of selection. The other power in the section is the selection of the number of directors who have to be appointed and the period for which they have to hold office. The CLB has the power to decide the number of directors to be appointed and also their period. In normal circumstances, the company is to be heard through the shareholders-directors who ordinarily represent all the shareholders. But due to the alternation of the circumstances, the petitioner had become entitled to be heard. Therefore, the CLB can pass a fresh order under section 408 after hearing the petitioner, to the extent thought necessary, and also the other shareholders who may wish to oppose the continuance of Government directors on the board. The Statute has conferred upon the CLB a wide power for regulation of the conduct of the affairs of the company upon such terms and conditions as may be, in the opinion of the Board, considered just and equitable in the circumstances of the case with a view to bringing to an end the matters complained of. This power of CLB is without prejudice to the generality of the powers of the Board under the provisions of the Act. The CLB has been conferred with wider jurisdiction to give an effective relief and to do complete justice to the parties. There cannot be any rigid rule which can be insisted upon. An order under section 408 may not be able to cure the illegal or prejudicial act which may already have performed but can be used to prevent further damage. The purpose of section 408 is to ensure that the Govt. Directors are appointed to act like a watch dog to ensure that the affairs of the company are in a proper manner. It is also beyond any controversy that the CLB while exercising its discretion is not bound by the terms contained Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 8 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 in the provisions of the Act if in a particular fact situation a further relief or reliefs, as the CLB may deem fit and proper, is warranted. While hearing petition under Section 408, the CLB is not divested of its plenary powers under Section 402 and other provisions of the Act as well as its discretionary powers under Regulation 44 of the CLB Regulations 1991 which is mutatis mistandi Section 151 of the CPC. The CLB has plenary powers to pass such equitable orders not only to remedy the mischief, but to prevent recurrence thereof. The exercise of these powers is not restricted to strict application of law, pleading in evidence, which may frustrate the very purpose of grant of these powers. A failure to exercise these powers on a narrow and pedantic approach is a self-destructive attitude to exercise to the equitable jurisdiction of the CLB. The CLB has the power to pass such order as it thinks fit to bring to an end the matters complained of or prevent the matters complained of or apprehended.
16. In the present case at present it would be against the interests of the company to give back the control of the company to the shareholders in view of filing of suits by the company against its shareholders and the shareholders being uninterested in the affairs of the Company and there being only two shareholders, one out of the two being an NRI. The other shareholders are yet to find place in the Register of Members on decision of the pending proceedings with the Mumbai High Court. In the backdrop of allegations and counter allegations any of the directors appointed by the Central Government under section 408 may be removed by the Central Government from his office at any time and another person may be appointed by that Government in his place as a director. The appropriate remedy in the facts and circumstances of the instant case, to my mind, would be to permit the UOI (Ministry of Corporate Affairs) to appoint a Whole Time Director for three years with fixed remuneration of Rs.1 lakh per month in addition to conveyance charges/conveyance to be provided by the Respondent Company in place of three directors as at present. The name of such Whole Time Director be got approved by the UOI from the CLB by mentioning a Company Application within a period of two weeks from the date of receipt of this order. The Whole Time Director so appointed shall be assisted by Shri Prakash B. Dialdas, a shareholder, directly or through his nominee and Shri Mohan Lakhani, a shareholder. These two shareholders of the Respondent Company are hereby appointed as Additional Directors for a period of one year. They along with the Whole Time Director shall constitute the Board of the R-1 Company. These two Additional Directors shall not be entitled to any sitting fee or any other expenses except travelling expenses limited to Rs.25,000/- per Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 9 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 month for each such Additional Director. The quorum for the Board shall be the Whole Time Director and any one or more of the Additional Directors. Before expiry of one year, the Whole Time Director shall mention a Company Application through the UOI to seek further extension of tenure of the Additional Directors for further one year. The Whole Time Director shall also update the CLB on the status of other shareholders on getting entitled to be on the register of Members on disposal of the pending proceedings before the Hon'ble High Court at Mumbai to enable the CLB to consider putting them as well on the Board of the R-1 Company.
The Whole Time Director shall also constitute a Grievance Cell in the R-1 Company to redress the grievances of the so-called allotees of the plots as per law. The Grievance Cell shall be headed by the Whole Time Director and shall also cater to the requirements of the Greenfields Plot Holders as well as the Residents Welfare Association. Two representatives (duly elected) of these two associations shall also be made members of the Grievance Cell by the Whole Time Director to hear the grievances of these two associations. The Members of the Grievance Cell shall not be entitled to any sitting fee or any other incidental/conveyance expenses.
17. The Whole Time Director so appointed by the UOI is hereby empowered to take all appropriate steps to hand over the colony to the Municipal Corporation of Faridabad at the earliest possible. He is hereby granted immunity from any kind of Civil and Criminal proceedings already launched or to be launched anywhere in the country against the Company and its Directors for all acts done prior to the date of the appointment of the Whole Time Director with an additional personal immunity and protection during all such legal proceedings for and against the Company. None of the State or Central Government agencies, in exercise of their regulatory, enforcement or like such powers initiate any action, civil, criminal, punitive or coercive actions against the Whole Time Director, for the acts of commission and omission in the Company without the prior approval of the Company Law Board. The day the Whole Time Director takes over his assignment the term of the present Directors and the Observer-cum-Facilitator shall come to an end. The interim injunctions granted shall also stand vacated on the date of the joining of the Whole Time Director.‖ Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 10 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 PROCEEDINGS BEFORE THIS COURT:
12. As in the interregnum, the Municipal Corporation of Faridabad2 envisioned interest in carrying out development work at the behest of the shareholders and other stakeholders including the RWAs, the MCF was impleaded as a party vide order dated 08.02.2016 along with the Director General, Town and Country Planning, Haryana3 Chandigarh.
The long and short of the position is that in exercise of powers under Section 23 of the Haryana Development and Regulation of Urban Areas Act, 1975, exemption had been granted to the company i.e., UICPL, for setting up a residential colony, namely Greenfields Colony in Sector 41-43, Faridabad on land measuring 438 acres vide Exemption letter dated 05.04.1982 and one of the conditions therein was that the company shall pay proportionate development charges if the main lines of roads, drainage, sewerage and electricity etc. are to be laid out and constructed by the Government, Haryana Urban Development Authority or the concerned local authority, the proportion of which was to be paid from time to time inter alia also enjoining that the company would be responsible for maintenance and upkeep of all roads, open spaces, public parks and public health services for a period of five years from the date of issue of Completion Certificate.
13. It appears that the DGTC vide order dated 01.12.2016 directed the company to transfer possession of all such roads, open spaces, public parks and public health services in the colony to the MCF on 2 MCF 3 DTCP Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 11 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 an "as is where is" basis leaving the colonizer to continue to be responsible for compliance of the various terms and conditions of the exemption, including but not limited to the following:
―a. Construction of community sites as per provision of Act No. 8 of 1975 as amended up to date.
b. Liability to obtain completion/part completion certificate. c. Development of commercial pockets including approval of building plans and grant of occupation certificates. d. Liability to deposit Infrastructure Augmentation charges, if not deposited earlier.
e. Clearance of outstanding dues on account of EDC/IDC including enhanced and interest thereupon, if any. f. You shall set aside all the bilateral issues with the allottees in the colony after affording an opportunity of personal hearing. g. Other statutory approvals including completion certificate of the colony required under Act/Rules as applicable on the exemption granted colony.
h. Any other directions issued by DTCP in the due course of time.‖
14. Shorn of unnecessary details, evidently there have been several rounds of discussions between the developer company (UICPL) with the officials of DTCP Haryana & MCF so much so that the matter went to the Punjab & Haryana High Court in CWP No. 25315 of 2014 and there came about a positive outcome in so much that the MCF officials expressed their willingness to take over the developmental work of the colony provided that DTCP, Haryana issues a completion certificate in respect of the colony. The matter went to and fro to the Courts and finally an affidavit of Mr. Jitender Kumar, IAS, the then Commissioner, MCF, Haryana has been filed dated 11.11.2022 in terms of the directions of this Court dated 02.08.2022 whereby the MCF has shown its willingness for taking over the Greenfields Colony for the purposes of development and maintenance. It would be Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 12 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 expedient to extract the relevant proposal of the MCF vide paragraph (11) onwards, which reads as follows:
―11. That the deponent issued directions to the Engineering Branch of this Corporation to assess the deficient infrastructure and maintenance cost of five years in the Green Field Colony. The Engineering Branch of this Corporation have appointed an independent Consultant to assess the deficient basic infrastructure required to be provided by the company and the cost involved; additional infrastructure, if any, required based on present day requirement along with estimate. The consultant conducted a detailed survey, including videography and photography of the existing infrastructure provided at site and assessing the existing population density including changes in FAR and other rules made from time to time, worked out an estimate of Rs. 99, 78, 13, 966/- (Ninety Nine Crores Seventy Eight Lacs Thirteen Lacs Nine Hundred and Sixty Six Only). A tabulated chart has been formulated below for the bare perusal of this Hon'ble Court:-
1. Re-construction of Mall Road/Avenue H Rs. 4,84,42,083/-
Road
2. Internal Roads construction (total 193 Rs. 18,82,98,660/-
roads.
3. Drain with mall road Rs. 2,05,79,161/-
4. Internal Road Storm water drain Rs. 17,33,21,989/-
5. Street Light Maintenance Rs.38,86,926/-
6. Park with five-year maintenance cost Rs.13,74,25,154/-
7. Water supply/repair of existing booster Rs.1,11,68,621/-
8. Sewer system Rs.7,50,76,955/-
9. New community Centre construction Rs.7,71,14,430/-
10. Construction of STP with MPS Rs. 26,25,00,000/-
The Deficiencies in lieu of Electrical Infrastructure have not been included. The necessary amount in lieu of electrical infrastructure shall be deposited with Dakshin Haryana Bijli Vitran Nigam. The company shall submit NOC from all other respective Departments for payment of water supply charges and electricity bills.
12. That the deponent has issued instructions to the Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 13 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 colonizer/developer company to ensure DTCP, Haryana directions issued on 01.12.2016 and order Dated 17.10.2022 circulated bearing memo no. 437 in which it is decided the principal takeover of Green Field colony. In order to provide mandatory public services and fulfill the statutory obligations within municipal limits as per the Haryana Municipal Corporation Act, 1994, it is responsibility of this Corporation to give facilities to the residents and to start the augmentation or creation of facilities but due to shortage of funds it is not possible to expedite these works therefore it would be appropriate, either.
i. The colonizer/developer company shall complete the internal development works/deficit infrastructure as per approved service plan / estimates at their own cost under the supervision of Engineering Branch of this Corporation in a time bound manner as may specified by Hon'ble High Court and to obtain completion certificate from DTCP, Haryana or ii. The colonizer/developer company shall transfer ownership rights of their unsold properties free from all encumbrances (not part of any litigation/mortgage/sale) situated in Green Field Colony, Faridabad in favour of MCF in lieu of the deficit infrastructure cost worked out by MCF so that the properties so proposed by M/s Urban Improvement Company may be e-auctioned on online HSIIDC official portal approved for disposal of ULB properties to recover the cost of deficit infrastructure.
13. That this Hon'ble Court may please pass an appropriate order specifying who will transfer the ownership rights of the properties free from all encumbrances to MCF i.e. Director or shareholders / the persons claiming to be interested in the company so that after receipt of funds, the work to complete deficit infrastructure shall be started as soon as possible in the interest of residents of Green Field colony.
15. In the said backdrop, Mr. Saurabh Kirpal, learned Senior Advocate appearing for the appellants/shareholders in CO.APPL. 574/2020 has vehemently submitted that Section 4084 of 1956 Act 4
408. Powers of Government to prevent oppression or mis-management .- (1) [Notwithstanding anything contained in this Act, the Central Government may appoint such number of persons as the [Tribunal][may, by order in writing, specify as being necessary to Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 14 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 effectively safeguard the interests of the company, or its shareholders or the public interests to hold office as Directors thereof for such period, not exceeding three years on any one occasion, as it may think fit, if the [Tribunal] [Substituted by Act 31 of 1988, Section 54, for sub-Sections (1) and (2) (w.e.f. 15.6.1988). ][on a reference made to it by the Central Government or on an application of not less than one hundred members of the company or of the members of the company holding not less than one-tenth of the total voting power therein, is satisfied, after such inquiry as it deems fit to make, that it is necessary to make the appointment or appointments in order to prevent the affairs of the company being conducted either in a manner which is oppressive to any members of the company or in a manner which is prejudicial to the interests of the company or to public interest:
Provided that in lieu of passing an order as aforesaid, the [Tribunal] [Substituted by Act 31 of 1988, Section 54, for sub-Sections (1) and (2) (w.e.f. 15.6.1988). ][may, if the company has not availed itself of the option given to it under section 265, direct the company to amend its articles in the manner provided in that section and make fresh appointments of Directors in pursuance of the articles as so amended, within such time as may be specified in that behalf by the [Tribunal] [Substituted by Act 31 of 1988, Section 54, for sub-Sections (1) and (2) (w.e.f. 15.6.1988). ].
(2) [ In case the [Tribunal] [Substituted by Act 31 of 1988, Section 54, for sub-Sections (1) and (2) (w.e.f. 15.6.1988). ][passes an order under the proviso to sub-section (1), it may, if it thinks fit, direct that until new Directors are appointed in pursuance of the order aforesaid, such number of persons as the [Tribunal] [Substituted by Act 31 of 1988, Section 54, for sub-Sections (1) and (2) (w.e.f. 15.6.1988). ][may, by orders specify as being necessary to effectively safeguard the interests, of the company, or its shareholders or the public interest, shall hold office as additional Directors of the company and on such directions, the Central Government shall appoint such additional Directors] [Substituted by Act 31 of 1988, Section 54, for sub-Sections (1) and (2) (w.e.f. 15.6.1988). ].
(3) For the purpose of reckoning two-thirds or any other proportion of the total number of Directors of the company, any Director or Directors appointed by the Central Government under sub-section (1) or (2) shall not be taken into account. (4) [ A person appointed under sub-section (1) to hold office as a Director or a person directed under sub-section (2) to hold office as an additional Director, shall not be required to hold any qualification shares nor his period of office shall be liable to determination by retirement of Directors by rotation; but any such Director or additional Director may be removed by the Central Government from his office at any time and another person may be appointed by that Government in his place to hold office as a Director or, as the case may be, an additional Director. (5) No change in the Board of Directors made after a person is appointed or directed to hold office as a Director or additional Director under this section shall, so long as such Director or additional Director holds office, have effect unless confirmed by the [Tribunal] [Inserted by Act 65 of 1960, Section 155 (w.e.f. 28.12.1960). ].
(6) [ Notwithstanding anything contained in this Act or in any other law for the time being in force, where any person is appointed by the Central Government to hold office as Director or additional Director of a company in pursuance of sub-section (1) or sub-section (2), the Central Government may issue such directions to the company as it may consider necessary or appropriate in regard to its affairs [and such directions may include directions to remove an auditor already appointed and to appoint another auditor in his place or to alter the articles of the company, and upon such directions being given, the appointment, removal or alteration, as the case may be, shall be deemed to have come into effect as if the provisions of this Act in this behalf have been complied with without requiring any further act or thing to be done.] [ Inserted by Act 41 of 1974, Section 31 (w.e.f. 1.2.1975).] (7) [ The Central Government may require the persons appointed as Directors or additional Directors in pursuance of sub-section (1) or sub-section (2) to report to the Central Government from time to time with regard to the affairs of the company.] [Inserted by Act 65 of 1960, Section 155 (w.e.f. 28.12.1960). ] Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 15 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 has since been repealed in view of the new Companies Act of 2013 having been enforced w.e.f., 29.08.2013, particularly after enforcement of Section 465 of the new Act of 2013 brought into force w.e.f., 30.01.2019 as per Notification issued by Ministry of Corporate Affairs S.O. 560(E) dated 30.01.2019. It would be relevant to reproduce Section 465 of the new Act of 2013, which provides as under:
"465. Repeal of certain enactments and savings.--(1) The Companies Act, 1956 (1 of 1956) and the Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961) (hereafter in this section referred to as the repealed enactments) shall stand repealed: 1* * * * * [Provided that] until a date is notified by the Central Government under sub-section (1) of Section 434 for transfer of all matters, proceedings or cases to the Tribunal, the provisions of the Companies Act, 1956 (1 of 1956) in regard to the jurisdiction, powers, authority and functions of the Board of Company Law Administration and court shall continue to apply as if the Companies Act, 1956 has not been repealed:
[Provided further that] provisions of the Companies Act, 1956 (1 of 1956) referred in the notification issued under section 67 of the Limited Liability Partnership Act, 2008 (6 of 2009) shall, until the relevant notification under such section applying relevant corresponding provisions of this Act to limited liability partnerships is issued, continue to apply as if the Companies Act, 1956 has not been repealed.
(2) Notwithstanding the repeal under sub-section (1) of the repealed enactments,--
(a) anything done or any action taken or purported to have been done or taken, including any rule, notification, inspection, order or notice made or issued or any appointment or declaration made or any operation undertaken or any direction given or any proceeding taken or any penalty, punishment, forfeiture or fine imposed under the repealed enactments shall, insofar as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken under the corresponding provisions of this Act;
(b) subject to the provisions of clause (a), any order, rule, notification, regulation, appointment, conveyance, mortgage, deed, document or agreement made, fee directed, resolution passed, direction given, proceeding taken, instrument executed or issued, Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 16 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 or thing done under or in pursuance of any repealed enactment shall, if in force at the commencement of this Act, continue to be in force, and shall have effect as if made, directed, passed, given, taken, executed, issued or done under or in pursuance of this Act;
(c) any principle or rule of law, or established jurisdiction, form or course of pleading, practice or procedure or existing usage, custom, privilege, restriction or exemption shall not be affected, notwithstanding that the same respectively may have been in any manner affirmed or recognised or derived by, in, or from, the repealed enactments;
(d) any person appointed to any office under or by virtue of any repealed enactment shall be deemed to have been appointed to that office under or by virtue of this Act;
(e) any jurisdiction, custom, liability, right, title, privilege, restriction, exemption, usage, practice, procedure or other matter or thing not in existence or in force shall not be revised or restored;
(f) the offices existing on the commencement of this Act for the registration of companies shall continue as if they have been established under the provisions of this Act;
(g) the incorporation of companies registered under the repealed enactments shall continue to be valid and the provisions of this Act shall apply to such companies as if they were registered under this Act;
(h) all registers and all funds constituted and established under the repealed enactments shall be deemed to be registers and funds constituted or established under the corresponding provisions of this Act;
(i) any prosecution instituted under the repealed enactments and pending immediately before the commencement of this Act before any Court shall, subject to the provisions of this Act, continue to be heard and disposed of by the said Court;
(j) any inspection, investigation or inquiry ordered to be done under the Companies Act, 1956 (1 of 1956) shall continue to be proceeded with as if such inspection, investigation or inquiry has been ordered under the corresponding provisions of this Act; and
(k) any matter filed with the Registrar, Regional Director or the Central Government under the Companies Act, 1956 (1 of 1956) before the commencement of this Act and not fully addressed at that time shall be concluded by the Registrar, Regional Director or the Central Government, as the case may be, in terms of that Act, despite its repeal.
(3) The mention of particular matters in sub-section (2) shall not be held to prejudice the general application of section 6 of the General Clauses Act, 1897 (10 of 1897) with regard to the effect of repeal Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 17 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 of the repealed enactments as if the Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961) were also a Central Act.
16. Mr. Saurabh Kirpal, learned Senior Counsel urged that consequent to repeal of the old Companies Act of 1956, the Central Government has no powers to appoint any Directors on the Board of the company and no longer controls its state of affairs and business in any manner; and that the company has to go back to its shareholders, who may have the liberty to appoint anyone on the Board so as to continue to manage and run the affairs of the company in question.
17. While the learned counsel for the Central Government acknowledged the changed position in law by virtue of the enforcement of the Companies Act, 2013, it was urged that the Central Government can still initiate action in terms of Section 241 of the Companies Act, 20135. Further, certain objections have been placed on the record, challenging the competency and lack of will besides the integrity of the appellants/shareholders seeking to manage and run the affairs of the company. Learned counsel for the Central Government 5 241. Application to Tribunal for relief in cases of oppression, etc.-- (1) Any member of a company who complains that-- (a) the affairs of the company have been or are being conducted in a manner prejudicial to public interest or in a manner prejudicial or oppressive to him or any other member or members or in a manner prejudicial to the interests of the company; or (b) the material change, not being a change brought about by, or in the interests of, any creditors, including debenture holders or any class of shareholders of the company, has taken place in the management or control of the company, whether by an alteration in the Board of Directors, or manager, or in the ownership of the company‗s shares, or if it has no share capital, in its membership, or in any other manner whatsoever, and that by reason of such change, it is likely that the affairs of the company will be conducted in a manner prejudicial to its interests or its members or any class of members, may apply to the Tribunal, provided such member has a right to apply under section 244, for an order under this Chapter.
(2) The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter.
Signature Not VerifiedCO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 18 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 invited the attention of this Court to some of the orders passed by this Court that would demonstrate that the appellants/shareholders have not been sincere in taking over the project and have been making empty promises through the course of litigation.
18. Evidently, there are as many as 3660 plot holders and almost 11000 dwelling units and about 60000 residents whose interests are involved. In order to break the unsavoury deadlock and to wriggle out of the complete mess that has been created over the years, there is no gainsaying that the affairs of the company should be run in such a manner that inspires confidence and credibility in the minds of the stakeholders. There is a ray of hope for the stakeholders now that the MCF has jumped into the fray. The matter came up for hearing before this Court on 19.12.2023 on which day detailed discussion followed, based on the pros and cons of the proposal by the MCF as contained in its affidavit dated 11.11.2023 and it would be expedient to reproduce the orders passed by this Court:
―8. It is pertinent to mention that the proposal submitted by the 'MCF is acceptable to the learned counsels for the three respective RWAs who are present today. However, learned Senior Counsel for the applicants/shareholders submits that the proposal (i) is outrightly not acceptable to them.
9. After some detailed discussion on the proposals submitted for finding out a way forward, a consensus has emerged. Accordingly, it is directed that let the petitioners/shareholders file a detailed and structured affidavit cum undertaking through their duly authorised representative so as to specify the names/details of the Directors, Managing Director of the UICPL who would be controlling its management and to delineate and demonstrate as to how and in what manner they propose to infuse funds into the entire township project including specific and tangible safeguards based on the report of accredited architects with regard to the situation at the site, status of the pending projects with timeline for their Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 19 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 completion and unsold inventory & disposition with regard thereto etc. if any.
10. Such affidavit cum undertaking shall also provide for setting up an escrow account with a bridge loan agreement from any nationalized bank or scheduled banks, or in the alternative without bridge agreement, as the case may be. It shall also specify the time line within which the petitioners/shareholders propose to hand over the site to the MCF and make the payment of lump sum amount claimed by the MCF in its affidavit dated 11.11.2022. 11 . Needless to state, the affidavit cum undertaking to be furnished shall also allude to the claims of the petitioner in CO.A.(SB) 45/2011as also any other claimant/intervener in C.A.No. 678/2022.
12. Learned Senior Counsel appearing for the petitioners/ shareholders requests for two weeks' time to submit the requisite affidavit cum undertaking. Let the same be filed after sharing the same with the other stakeholders.‖
19. In compliance to the aforesaid directions, an affidavit of Mr. Ish Godhwani dated 03.01.2024 has been filed on behalf of the appellants/ shareholders whereby it is undertaken to initiate the following measures:
―(3)(a)Urban Improvement Company Private Limited (hereinafter "UICPL /Company") will come under the exclusive control of the Appellants shareholders, who will be free to manage it as per law and subject of course to the Order(s) passed by this Hon'ble Court. The handing over of the Company would necessarily entail inter alia the removal of Central Government appointed directors from the Board of the Company.
(b) From the date of handover of the Company to the Appellants shareholders in terms of (a) above (hereinafter "the Trigger Date"), the Appellants shareholders and the Municipal Corporation of Faridabad (hereinafter "MCF") would work in tandem to ensure development of the Greenfields Colony as follows:
(i) MCF has estimated that the total remaining developmental works (excluding internal electrical augmentation work, if arises within five years from the date of completion), would require a capital expenditure of Rs.99,78,13,966/- (hereinafter ―the Development Cost‖).
(ii) The above estimate is based upon a Detailed Project Report Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 20 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 of August 2022 prepared by Credible Management and Consultants Private Limited (hereinafter ―the DPR‖) which also provides in detail, the development works to be carried out in the Greenfields Colony (hereinafter ―Development Works"). A copy of the DPR is annexed herewith as Annexure-"A".
(iii) All Development Works, except as provided in para (iv) below, will be carried out by MCF (hereinafter "MCF Works").
(iv) The following works shall be carried out by the Appellants shareholders, as per designs and drawings approved by MCF (hereinafter ―Shareholders' Works");
installation of sewage treatment plant construction of storm water drainage construction of new Community Centre building; and development of parks.
(v) The Shareholders' Works be completed within 15 months from the Trigger Date subject to any force majeure conditions and the handover of the Greenfields Colony to MCF after completion of Shareholders' Works will be done in terms of the Exemption Memo dated 05.04.1982 issued to the Company by the Town and Country Planning Department, Haryana under Section 23 of Haryana Development and Regulations of Urban Areas Act 1975 (hereinafter "Exemption Memo"). A copy of the Exemption Memo dated 05.04.1982 by the Town and Country Planning Department, Haryana is annexed herewith and marked as Annexure - "B".
(vi). During execution of the Shareholder's Works, any variation/escalation m costs, shall be borne by the Appellants shareholders at their own costs.
(vii). The Appellants shareholders will deposit the operations and maintenance cost for the Sewage Treatment Plants (including the main pumping station) and electricity charges / bills of Sewage Treatment Plants for a period of five years from the date of completion of colony by the Competent Authority.
(c) The infusion of Development Cost shall commence from the Trigger Date, in a manner stipulated in this Affidavit and shall be as follows:
(i) The Appellants shareholders shall raise the funds for Development Cost by selling the assets of the Company to the extent of the Development Cost. The disposal method will be commercially prudent and transparent and all the sale proceeds will be deposited in escrow accounts. The Appellants shareholders undertake that no asset shall be sold below the circle rate. It is clarified that monies from the said escrow accounts will be used Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 21 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 exclusively for the purposes of development of the Greenfields Colony. A schedule of theunsold inventory of the Company, to the best of the knowledge of the Applicant Shareholders, is annexed herewith and marked as Annexure- "C".
(ii) Upon sale of assets of the Company, the sale proceeds (after deducting the expenses incurred in executing the sale, account of which shall be kept by the shareholders and be made public) shall be deposited into two distinct escrow accounts:
• Account operated by Commissioner, MCF or his representative, for the works to be executed by MCF, i.e., MCF Works (hereinafter "MCF Escrow").
• Joint Account operated by Chairman of the Company, with Commissioner, MCF or his representative, specifically for works undertaken by the shareholders, i.e., ShareholdersWorks (hereinafter "Shareholders' Escrow"). The Appellants shareholders shall not use the funds in this account for any other purpose apart from executing the Shareholders Works and accounts shall be maintained in a transparent manner.
(d) The schedule of payment and execution of work will be as follows:
(i) The first instalment of 25% of the estimated cost as per DPR for the MCF Works, would be credited in the MCF Escrow within 90 days of the Trigger Date. Similarly, 25% of estimated cost as per the DPR for Shareholders Works, would be credited in the Shareholders' Escrow within ninety (90) days of the Trigger Date.
(ii) The second instalment of 25% of the estimated cost as per DPR for the MCF Works, would be credited in the MCF Escrow within 6 months of the Trigger Date. Similarly, 25% of estimated cost as per the DPR for Shareholders Works, would be credited in the Shareholders' Escrow within 6 months of the Trigger Date.
(iii) The third instalment of25% of the estimated cost as per DPR, for the MCF Works, would be credited in the MCF Escrow within 9 months of the Trigger Date. Similarly, 25% of estimated cost as per the DPR for Shareholders Works, would be credited in the Shareholders' Escrow within 9 months of the Trigger Date.
(iv) The final instalment of 25% of the estimated cost as per DPR for the MCF Works, would be credited in the MCF Escrow within 12 months of the Trigger Date. Similarly, 25% of estimated cost as per the DPR for Shareholders Works, would be credited in the Shareholders' Escrow within 12 months of the Trigger Date.‖
20. It was urged that the term ―Trigger Date‖ would be the date from which the shareholders take over the control of the affairs and Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 22 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 management of the company including its assets and properties. It may further be indicated that the submissions advanced by the learned Counsels for the parties were heard at some length on 08.02.2024. It has been clarified that as per the estimates, Rs. 55 crores shall be payable to the MCF for the developmental work and about Rs. 45 crores shall be spent on the development work undertaken to be carried out by the shareholders/management.
21. However, there are certain objections which have been raised by the RWAs as also the Ministry of Corporate Affairs, which need to be considered.
OBJECTIONS BY GREENFIELD PLOT HOLDERS:
22. Learned counsel appearing for the aforesaid RWA has urged that Mr. Ish Godhwani is not a duly authorised representative of the appellants/shareholders, as he is merely a property dealer and cannot be a part of the Board of Directors and it was pointed out that most of the appellants/shareholders are residing abroad and cannot be involved in the day to day affairs of the company and their intention to run the affairs of the company is manifestly suspect.
23. A strong objection is also taken in the affidavit on behalf of the RWA to the effect that there is no complete Register of Members of the company and it is also pointed out that even on previous occasions, empty undertakings had been given by the appellants/shareholders to infuse funds to the extent of Rs. 30 crores, which aspect was recorded in the order of this Court dated 06.05.2013 and yet nothing was done, and the said charade is being repeated. It is also lamented that the plot holders have paid huge amounts towards Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 23 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 development charges amounting to more than Rs. 100 crores or so upto the year 1994, which remains unaccounted for.
24. In the said backdrop, a request has been made that since the plot holders have suffered, one person from each of the RWAs should be appointed as Directors of the company.
OBJECTIONS OF GREENFIELD RESIDENTS WELFARE ASSOCIATION:
25. This association too entertains doubts about the credibility of the Ex-Management/appellant/shareholders so as to seize control of the assets of the company assets and run its affairs also have an objection to the role of Mr. Ish Godhwani and for the fact that most of the shareholders are residing abroad. They are also lamenting that the plot holders having been burdened with significantly higher EDC charges due to manifest errors and contumacious conduct on the part of the Ex-Management and have expression their apprehension that there is a possibility of colony funds being diverted to other development projects thereby potentially compromising the interest of the residents, owner and plot holders.
OBJECTIONS OF MINISTRY OF CORPORATE AFFAIRS:
26. Not wanting to give up its say in the running of the affairs of the Company, the Ministry of Corporate Affairs has raised objections inter alia to the effect that in the affidavit dated 03.01.2024, no details have been provided with regard to the township projects and the affidavit is not accompanied with the architect's report. Further that no worthwhile plan has been put forth for the development of a sewage treatment plant, storm water drainage, Community Centre and also Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 24 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 park development. It is pointed out that the appellants/ shareholders have not given any calculation for the estimated expenses required to cover the cost of the sewage treatment plant, operations, maintenance and electricity costs. There are several objections with regard to the correctness of unsold inventory referred to in Anneuxre-C of their affidavit pointing out that it is reflected that there are 59 residential plots under litigation whereas 56 plots exist and the appellants/shareholders have omitted to make additions of the vacant sites for various facilities in Anneuxre-C to their affidavit; and lastly, that no statement has been given by the appellant/shareholders as regards the actual infusion of funds either through rights issue or otherwise through bridge loans with any banker. ANALYSIS AND DECISION:
27. Having bestowed my anxious consideration to the detailed and vociferous submissions advanced by the learned Counsels for the parties and on careful perusal of the record, first things first, unhesitatingly the control and interference by the Central Government appointees in the Board has to cease consequent to the repeal of Section 408 of the Companies Act, 1956. It is a matter of record that the Government nominated Directors, over the last four decades, have been unable to undertake any appreciable measures so as to develop the site in question despite having sold over 300 plots of the company. Even the CLB in the impugned order dated 24.05.2011, had the occasion to comment that the Directors nominated by the Central Government had thoroughly mismanaged the affairs of the company and yet on account of inter se disputes amongst the Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 25 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 appellant/shareholders that exhibited lack of interest in managing and running the affairs of the company, it was not possible to give them back the control of the company.
28. Having said that, it is but also apparent that there is a complete trust deficit against the appellant/shareholders, who have certainly more to prove than what they are propounding in their affidavit filed through Mr. Ish Godhwani dated 03.01.2024. The said affidavit refers to a Memorandum of Settlement dated 18.04.2023 arrived at between the MCF and shareholders of the company through power of attorney Mr. Ish Godhwani by virtue of which the estimates towards the costs of development work had been prepared based on Detailed Project Report of August, 2022 by the Credible Management & Consultant Private Limited and the estimated cost of Rs. 99 crores (approx.) was brought forth for commencing and carrying out the developmental work to the satisfaction of all, and the MoU dated 18.04.023 inter alia envisaged as under:
―3. Modalities of sale of assets.
3.1 The Parties recognise and acknowledge that a substantial part of the assets of the Company, in the form of immoveable property, are presently under litigation before various judicial fora.
Consequently, in order to avoid involvement of MUNICIPAL CORPORATION, FARIDABAD In the said litigations, the Shareholders would sell the assets of the Company to the extent of Rs. 99 crores, including variations/ escalation of market rates or arrange the same amount with existing funds or any other resources of the Company. The obligation of payment for shareholders will begin after the Hon'ble High Court of Delhi or the Competent Authority hands over the company's control back to its original shareholders.
It is agreed between the parties that in the event ·of Company, which would be controlled by shareholders after the Trigger date, not being able to pay the above said amounts of instalments on time, the shareholders shall be personally liable to pay the balance Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 26 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 amount to the tune of Rs . 99 crores. It is further agreed between the parties that the liability of the shareholders to pay the balance amount, as per the above said clause, would arise as soon as the time period to pay the respective instalments, as stipulated in Clause 3.2, by the Company gets over.
3.2 Upon sale of assets of the Company or existing funds or amounts arranged through any other resources of Urban Improvement Company Pvt. Ltd., the Shareholders would deposit all the sale proceeds and funds from other resource if any (after deducting the expenses incurred in executing the sale, account of which shall be kept by the Shareholders) into two different escrow Accounts to be opened specifically for that purpose. THE FIRST escrow account jointly operated with COMMISSIONER MUNICIPAL CORPORATION OF FARIDABAD or his representative and CHAIRMAN of Urban Improvement Company or shareholders or any authorised representative for the works to be executed by MUNICIPAL CORPORATION OF FARIDABAD. THE SECOND Escrow account will be operated by CHAIRMAN of Urban Improvement Company or shareholders or any authorised representative specifically for works undertaken by the shareholders, as per the work taken from DPR in clause 2.3. The CHAIRMAN of Urban Improvement Company or shareholders or any authorised representative will give an undertaking that they will not use the funds in this account for any other purpose apart from works undertaken by shareholder from MUNICIPAL CORPORATION OF FARIDABAD as per works in clause 2.3. The works to be executed by the shareholders shall be completed in the time schedule given below in the clause 3.3‖
29. It is also pertinent to mention here that as per the affidavit dated 03.01.2024, status of unsold inventory at the site is stated to be as under:-
DETAILS OF RESIDENTIAL PLOTS S.No. Particulars No. of Area in Total Estimation Plots Sq. Yards estimated as per circle Market Value rate [@ Rs.
[@Rs. 2 Per. 40,000
crores per per Sq. Yd.]
Plot]
1. Residential 70 26482.79 -- --
Plots
Signature Not Verified
CO.A(SB) 36/2011; 37/2011 &
Digitally Signed By:PRAMOD 79/2011 Page 27 of 39
KUMAR VATS
Signing Date:22.03.2024
18:49:18
available
with the
company
2. Plots under 59 21805.30 118,00,00,000 87,22,12,000
litigation
3. Vacant 11 4677.49 22,00,00,000 18,70,99,600
Plots
DETAILS OF COMMERCIAL PLOTS
S.No. Particulars No. of Area in Total Estimation
Plots Sq. Yards estimated as per circle
Market Value rate [@ Rs.
(In Rs.) Per. 70,000
per Sq. Yd.]
1. Cinema 1 5052.96 60,00,00,000 35,37,07,200
2. Commercial 1 2608.76 30,00,00,000 18,26,13,200
Plot of
Mathura
Road
30. It is pertinent to mention that although doubts have been orally raised on the status of the unsold inventory described vide Annexure-
C, no one has filed any objections disputing it, except the Greenfields Plot Holders-cum-Residents Association, the appellant in CO. A (SB) NO. 37/2011, but apparently there are just levelled bald allegations in their reply to the affidavit dated 03.01.2024, without substantiating the same with any categorical averment and/or documents. Further, indisputably, it is also brought to the fore that the long standing disputes amongst the shareholders have since been resolved after the shareholders have entered into a family settlement before the Bombay High Court in terms of order dated 24.09.20186. It is also pertinent to mention that the entire mess has been created due to inter se disputes 6 Annexure ‗A' to order dated 24.09.2018 Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 28 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 amongst the shareholder. There is no plea except for the mismanagement of the affairs of the company by the erstwhile shareholders and that none of the promoters and/or the directors have been proceeded with any kind of cheating, fraud or misappropriation in any criminal court or by the Serious Fraud Investigation Office (SFIO).
31. However, in view of the dismal track record of the shareholders which demonstrates a history of lack of credibility on their part, the disposition agreed as per the MOU dated 18.04.23 with regard to the sale, alienation or disposal of the properties of the company, is quite understandably, not acceptable to the other stakeholders. All said and done, there is no gainsaying that the proposal put forth by the MCF is worth consideration. There also appears to be a change in the circumstances surrounding the appellants/shareholders as it is brought to the fore that a board of directors have been since been constituted in terms of Annexure-D to the affidavit dated 03.01.2024 and the long standing disputes amongst the appellant/shareholders have since been resolved and that the legal heirs of the shareholders have entered into a family settlement before the Bombay High Court in terms of order dated 24.09.2018 and the position of the share holdings has been brought out as under:-
S.No. Name of the Relation with original Number Shareholder shareholders/ of shares justification of present shareholding
1. Prakash Dialdas . Original shareholder (2 150 shares) . Son of Balram Dialdas (10 shares from the estate Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 29 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 of Balram Dialdas) . 138 shares from the estate of Bhai Pratap Dialdas and Lachmibai Dialdas
2. Anand Patwardhan . 5 shares from the estate 71` of Nirmala Patwardhan and W.H. Patwardhan as their son (original shareholders holding 5 shares and sine deceased) . 66 shares from the estate of Bhai Pratap Dialdas and Lachmibai Dialdas being their grandson
3. Kailash Chanrai . 66 shares from the estate 66 of Bhai Pratap Dialdas and Lachmibai Dialdas being their grandson
4. Aruna Jagtiani . 66 shares from the estate 66 of Bhai Pratap Dialdas and Lachmibai Dialdas being their daughter
5. Pratap Kirplaney . 25 shares from the estate 25 of Bhai Pratap Dialdas and Lachmibai Dialdas being their grandson
6. Vikram Kriplaney . 25 shares from the estate 25 of Bhai Pratap Dialdas and Lachmibai Dialdas being their grandson
7. Lokmanya Kriplaney . 25 shares from the estate 25 of Bhai Pratap Dialdas and Lachmibai Dialdas being their grandson
8. Manjit Kriplaney . 25 shares from the estate 25 of Bhai Pratap Dialdas and Lachmibai Dialdas being their grandson
9. Devin Kohli . 10 shares from the state 10 (Legal heir of of Balram Dialdas being Monolo Dialdas) his grandson (son of Late Monolo Dialdas)
10. Herkishan Dialdas . 10 shares from the state 10 Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 30 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 of Balram Dialdas being his son
11. Georgina . 10 shares from the state 10 Hiradarmani of Balram Dialdas being his daughter
12. Angelina Kohli . 10 shares from the state 10 of Balram Dialdas being his daughter FINAL DIRECTIONS:
32. The crux of the problem is that there are too many stakeholders and each wants to have a say in the matter. While that is understandable as they have suffered insurmountable problems due to lack of basic amenities and facilities for a very long and difficult forty years, that were promised by the company. All said and done, it is oft- repeated that ―doubts kill more dreams than failure ever could‖. The doubts in the mind of the stakeholders and in particular the residents of the locality, need to be addressed in a manner that inspires confidence. While it would not be prudent to allow the RWAs to run the affairs of the company who have no expertise and skills that the Real Estate Market demands, the shareholders have to come clean and show their sincerity, commitment and financial wherewithal to undertake to do development work at the site.
33. This Court finds that certain calculated and strategic measures can be initiated so to commence development work at the site and ameliorate the suffering of the stakeholders. At the cost of repetition, the MCF has brought alive the hopes of the stakeholders/residents of the Colony and for an estimated cost of Rs. 99.79 crores, which is to be borne/shared by the MCF and the shareholders/stakeholder, there is Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 31 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 a possibility that necessary development work may commence at the site. Therefore, in the totality of the abovesaid background, it is hereby provided that the company i.e. UICPL, will henceforth be under the exclusive control of the appellant/shareholders, who would be free to manage its affairs as per law and appoint its own Board of Directors including a Managing Director, auditors and Company Secretary within 15 days from today or 8th April, 2024, whichever is earlier, to run its affairs and take absolute control of its properties/assets. The Chairman & Managing Director shall have unhindered access to the site for the purpose of carrying out inspection, planning and carrying out the development work. However, this disposition shall be to the following paramount conditions:
A. DEVELOPMENT WORK TO BE CARRIED OUT BY THE COMPANY:
(i) The company through its shareholders shall infuse or bring in a total investment of Rs. 50 crores from their personal sources including through banks and institutions, without creating any charge, mortgage or lien over the assets/properties of the company but only on their personal assets, which shall be deposited in an escrow account with any nationalized bank or financial institution;
(ii) The said investment of Rs. 50 crores by the shareholders shall be infused by way of four quarterly instalment of Rs. 12.5 crores viz., on or before 30.06.2024; 30.09.2024; 31.12.2024 and 31.03.2025.
(iii) The said funds shall be utilized by the company towards development work in the nature of installation of a sewage treatment Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 32 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 plant; construction of storm water drainage and construction of a new community centre building; besides development of the parks7 and ensuring timely payments towards electricity charges as also operation and maintenance costs in terms of the Exemption Memo dated 05.04.1982.
(iv) The said amount of Rs. 50 crores, which is to be infused over a period of one year shall be considered as short term loan or advance by the shareholders to the company and shall be accounted as such in the balance sheet of the company without creating a charge, mortgage or lien over the assets/properties of the company.
(v) The amount so infused shall be reimbursable to the shareholders who would invest the same, without payment of interest and the contributing shareholders shall remain unsecured creditors.
(vi) Further, the company shall be at liberty to transfer any amount over Rs. 50 crores into its personal account subject to the approval of the Court Commissioner.
(vii) The aforesaid development work shall be carried out within a period of 15 months from 15.04.2024 by the company, failing which the advances and loans given to the Company shall stand forfeited to the company to be utilized exclusively for the maintenance and upkeep of the Colony
(vi) Shri Arun Arya, Principal District & Sessions Judge, Delhi (retired) is hereby appointed as the Court Commissioner to supervise the completion of the pending projects, initially for a period of six months from 15th April, 2024. He will be paid a fee of Rs. 3.25 lakhs 7 In terms of affidavit of Mr. Ish Godwani dated 03.01.2024.
Signature Not VerifiedCO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 33 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 per month plus Rs. 5,000/- for every visit to the site; and who shall be assisted by Shri Ravi Chawla. Advocate, who shall be paid a monthly fee of Rs.1,25,000/-. The same shall be payable by 7th of each succeeding English Calendar month from the First Escrow account referred hereinabove.
(viii) The escrow account shall be operated by the Chairman and/Managing Director of the company under the overall supervision and monitoring of the Court Commissioner.
B. DEVELOPMENT WORK TO BE CARRIED OUT BY THE MCF:
(i) The company shall infuse funds in the first phase up to a sum of Rs. 55 crores through banks or financial institutions by creating charge, mortgage or lien over the assets/properties of the company to that extent, which shall be deposited in a second Escrow account, and said amount shall be utilized for the purposes of commencement of development work by the MCF in a phased manner; and such account shall be operated jointly by the Chairman of the company and the Commissioner of the MCF or his duly authorised officer not below the rank of Senior Superintendent Engineer.
(ii) The company through its Board of Directors shall be free to raise loans from banks or financial institutions for the purpose of sale of the properties/assets of the firm in the initial phase to the extent of Rs. 50 crores only, till such time the development work is completed by the MCF;
(iii) All proceeds from the sale of the plots of land or other properties of the company shall be deposited in the second escrow Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 34 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 account. The said escrow account will be used exclusively for the purpose of payment of developmental work to be performed by the MCF;
(iv) The sale of the assets/properties of the company shall be conducted under the supervision and monitoring of the Court Commissioner and it is specifically provided that no immovable property shall be sold and parted with, or be put to any charge, mortgage or lien without prior permission of the Court Commissioner;
(v) The Court Commissioner shall be competent to ask for any information and details including pending accounts from the company, with regard to the sale transactions involving the properties/assets of the company;
(vi) The loans taken by the company for the sale of its assets shall not affect the existing mortgages/charges, if any.
(vii) The development work shall be carried out by the MCF in a phased manner and the schedule of payment shall be governed in the following manner:
(a) The first instalment of 25% of the estimated cost as per DPR for the MCF Works, would be credited in the MCF Escrow in advance on or before 30th April, 2024. This is mandatory condition so that the work starts before the Monsoon period.
(b) The second instalment of 25% of the estimated cost as per DPR for the MCF Works, would be credited in the MCF Escrow within four months i.e., on or before 31St August, 2024.
(c) The third instalment of25% of the estimated cost as per DPR, for the MCF Works, would be credited in the MCF Escrow within 9 months i.e., on or before 31st December, 2024.
(d) The final instalment of 25% of the estimated cost as per DPR for the MCF Works, would be credited in the MCF Escrow on or before 31st March, 2025.
(viii) Escalation costs, if any, that may be demanded by the MCF, Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 35 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 subject to just exceptions, shall be borne by the company.
C. GENERAL CONDITIONS:
(i) All the records including the books of accounts, record of the minutes, which are in the possession hitherto with the Board of Directors conducting the affairs of the company shall be handed over to the Chairman of the company in terms of affidavit dated 03.01.2024 on or before 08.04.2024. The intimation thereof with relevant details be also given to Sh. Arun Arya, Advocate, Court Commissioner.
(ii) The company shall comply with all the laws and bye-laws of the statutory authorities, including payment of any taxes and other liabilities in accordance with law.
(iii) The Court Commissioner shall ensure that a meeting is convened every month and not later than 45 days under his Chairmanship with the Chairman and/or Managing Director of the company as also the concerned official(s) from the MCF, besides inviting the present President & Secretary of the RWAs, so as to take stock of the development work being carried out at the site and take remedial actions/measures, wherever necessary.
(iv) The entire supervision of the finances and handing over of possession of the completed flats to the flat buyers shall be done under the control and supervision of the Court Commissioner. No immoveable property shall be sold/parted with or mortgaged without prior permission of the Court Commissioner.
(v) The Court Commissioner shall ensure that no part of the funds shall be utilized in any manner for any other project and not be Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 36 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 siphoned off in any manner; and in this regard may pass necessary directions to the concerned bank/financial institutions.
(vi) The operation of the account shall be monitored by the Court Commissioner, who shall have inherent powers to issue any notice, seek rendering of accounts from the Chairman or the company through its Board of Directors including availing the certified copy of the statement of accounts from the concerned bank.
(vii) The Court Commissioner shall submit monthly reports regarding the status of the development work performed and utilization of the funds.
(viii) The Court Commissioner shall be competent to ask for any information/detail including pending accounts from the Company as well the Banks operating the Escrow Accounts.
(ix) The Court Commissioner shall monitor the inflow and outflow from the escrow accounts. He will also file monthly progress reports before this court starting from May, 2024 by the tenth day of such month and thereafter by the 10th of each succeeding month.
(x) Learned Advocate Mr. Ravi Chawla shall co-operate and provide all assistance to the Court Commissioner and shall perform all tasks and legal work including drafting, preparing and writing of periodical reports, and carry out visits to the site for physical inspection and do such all acts that he may be called upon to do by the Court Commissioner.
(xi) Any of the Resident Welfare Association's through its authorised Office bearers shall, or otherwise too, if there is any issue, be at liberty to approach the Court Commissioner who may pass Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 37 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 appropriate directions to the Chairman and /or the Managing Director for taking appropriate action.
(xii) A dedicated email account shall be created by the Court Commissioner so as to enable the stakeholders to reach out to the Court Commissioner in case of any problems.
(xiii) The progress of development work and compliance as per above orders/directions shall be reviewed after every two months, for which the matter shall be placed before this Court on 15 th May, 2024, 15th July, 2024, 17th September, 2024, 19th November, 2024, and further dates would be given on publishing of the Delhi High Court calendar for the year 2025.
(xiv) The Court Commissioner shall ensure that the aforesaid directions are duly publicized/advertised in all leading Hindi and English newspapers besides distributing the same by way of leaflets to the residents at the costs and expenses of the company.
(xv) The Court Commissioner shall be free to approach this Court as and when any issues arise that may not be capable of being resolved by him.
(xvi) The aforesaid disposition shall be without prejudice to any claims settled or pending in any legal forum, instituted at the behest of any one having or claiming any right, title or interest in the properties/assets of the company including criminal proceedings.
34. In view of the aforesaid disposition laid down by this Court, all the pending applications shall stand answered with regard to the management and running of affairs of the company. However, it is provided that in case this disposition does not fructify and the desired Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 38 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18 results are not reached on being assessed objectively, the concerned applicants shall be at liberty to revive the applications in future, for hearing and disposal.
35. Re-notify for compliance on 15.05.2024.
DHARMESH SHARMA, J.
MARCH 22, 2024 Sadiq/sp Signature Not Verified CO.A(SB) 36/2011; 37/2011 & Digitally Signed By:PRAMOD 79/2011 Page 39 of 39 KUMAR VATS Signing Date:22.03.2024 18:49:18