Bombay High Court
Official Liquidator vs J.B.Dimonds Limited on 30 August, 2019
Author: S.J.Kathawalla
Bench: S.J. Kathawalla
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
OFFICIAL LIQUIDATOR REPORT NO. 22 OF 2019
IN
COMPANY PETITION NO. 105 OF 2011
In the matter of the Companies Act, 1956;
And
In the matter of M/s. J. B. Diamonds
Limited (in Liquidation).
ICICI Bank Limited ... Petitioners
Mr. Sharan Jagtiani, Mr. Shanay Shah along with Ms. Shradha Achliya for the Ofcial
Liquidator
Mr. J.P. Sen, Senior Advocate, Mr. Shashank Fadia along with Ms. Priyanka Fadia,
for INVENT
Mr. Phiroze Colabawalla along with Mr. Nikhil Rajani I/by M/s. V. Deshpande and
Co., for Kotak Mahindra Bank Ltd.
Mr. Raghavan Sarathy I/by Thodur Law Associates, for Bhagwanbhai Kukadiya, Mr.
Rajesh Surani, Mr. Vallabhbhai Surani, Mr. Jivrajbhai Surani, Mr. Sureshbhai
Kukadiya, Mr. Virjibhai K. Kukadiya, M/s. Bhavik Gems, J.B.Jewellery Pvt. Ltd.,
Riya Diamonds P. Ltd. And Meer Gems
Mr. Mahendhar Aithe, Company Prosecutor, present.
CORAM : S.J. KATHAWALLA, J.
RESERVED ON : 24TH APRIL, 2019 /
23RD AUGUST, 2019
PRONOUNCED ON : 30TH AUGUST,2019
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JUDGMENT :
1. By the above report, the Ofcial Liquidator is seeking, inter alia, an order and direction from this Court to permit the Ofcial Liquidator to (i) break open the lock put by the ex-management of J.B. Diamonds Limited, the Company (In Liquidation) ("the Company") on the premises namely Bharat Diamond Bourse, Ofce Space No.e120,8, Bandra Kurla Complex, Bandra (E), Mumbai-40,80,8 0,851; and (ii) take physical possession of the assets of the Company, of which symbolic possession has already been taken by the Ofcial Liquidator, and if necessary, with the assistance of the Police Authorities, by directing the tenants (tenancy rights whereof are disputed by the Ofcial Liquidator) to vacate the premises. The Ofcial Liquidator is also seeking other consequential directions including, inter alia, to suggest and recommend the name of a panel valuer to conduct valuation of Ofce Space No.e120,8 at Bharat Diamond Bourse and to permit the Ofcial Liquidator to pay the professional fees of the panel valuer as per the norms fxed by this Court.
2. The Ofcial Liquidatorrs Report has been fled on the basis that the ex- directors of the Company in Liquidation have colluded with the partners/directors of the alleged tenants namely M/s. Bhavik Gems ('Bhavik Gemsr), J.B. Jewellery Pvt. Ltd. ('J.B. Jewelleryr), Riya Diamond Pvt. Ltd. ('Riya Diamondr) and M/s. Meer Gems ('Meer Gemsr) ("the tenants"), and have obtained collusive orders/decrees to not disturb their possession by playing fraud on the Court of Small Causes at Bombay, the 15th Additional Civil Judge Court at Surat and the Small Causes Court at Surat ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 3 / 41 OLR-22-2019.doc ("the Courts"). All the decrees have been obtained from the Courts after the date of the winding up order, i.e., 19 th June, 20,812 and no leave under Section 446 of the Companies Act, 1956, have been obtained by the alleged tenants/Plaintifs in the R.A.D. Suits from this Court. In fact, even today, no such application for seeking leave under Section 446 has been fled by the tenants/Plaintifs/alleged decree holders.
3. The relevant facts giving rise to the above report are briefy set out hereunder :
4. The Company was ordered to be wound up by this Court vide Order dated 19th June, 20,812 and the Ofcial Liquidator attached to this Court came to be appointed as the liquidator for the Company. By Order dated 6 th June, 20,81e, this Court in Company Application No. 12e of 20,81e, fled by Kotak Mahindra Bank Limited (secured creditor), had directed the Ofcial Liquidator to take possession of the following assets of the Company:
a. Ofce Premises at 6-B Unity House, 3rd foor, Prasad Chambers, Tata Road No.1, Swadeshi Mills Compound, Opera House, Mumbai-40,80,8 0,80,84;
b. Ofce Premises at Unit No.40,85, 4th foor, Prasad Chambers, Tata Road No.1, Swadeshi Mills Compound, Opera House, Mumbai-40,80,8 0,80,84;
c. Ofce Premises at Unit No.40,86, 4th foor, Prasad Chambers, Tata Road No.1, Swadeshi Mills Compound, Opera House, Mumbai-40,80,8 0,80,84;
d. Ofce Premises at Unit No.41e, 4th foor, Prasad Chambers, Tata Road No.1, Swadeshi Mills Compound, Opera House, Mumbai-40,80,8 0,80,84;::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 :::
Nitin 4 / 41 OLR-22-2019.doc e. FP No. 12, Patel Nagar, Ashwanikumar Road, TP Scheme No.4, Surat; f. Factory Building, 24e-249, Lambe Hanuman Road, Near Railway Station,
RS No.46/A/2 Paikee TP Scheme No.4, FP No.249-A & 24e, Surat City, Ward, Navagam, Surat;
g. Factory Building, Plot No.147 to 151, Pandoi Industrial Estatem Ved Road, Surat. RS No. 9 & 10,8/1, Moje: Tunki, Tal: Choryasi, Dist: Surat;
h. Factory Building, Plot No.21, 22, Nehru Nagar, Lambe Hanuman Road, B/ H Railway Station, Surat, Ward : Navagam. RS No.30,8, CS No.1722, 1723, TP Scheme No. 4, FP No. 234, 235, Surat; and i. Bharat Diamond Bourse, Ofce Space No.e120,8 along with 2 Car parking situated at Bandra Kurla Complex, Bandra (E), Mumbai-40,80,8 0,851.
5. Pursuant to the Order dated 6th June, 20,81e, the Ofcial Liquidator had deputed its representative to take possession of the abovementioned properties between 21st June, 20,81e to 23rd June, 20,81e. Accordingly, on 22nd June, 20,81e, the representative of the Ofcial Liquidator took physical possession of Ofce Space No. e120,8, Bharat Diamond House, Bandra Kurla Complex, by afxing a paper seal on the existing lock, in presence of the representatives of the Kotak Mahindra Bank (secured creditor). As regards the remaining properties, the Ofcial Liquidator was able to only take symbolic possession thereof, since the tenants in possession of their respective premises (set out in paragraphs 4(a) to (h)) refused to hand over possession on the ground that they have obtained orders/decrees from the Small Causes Courts ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 5 / 41 OLR-22-2019.doc restraining the Company from disturbing their possession.
6. The details of the decrees passed by the Courts are briefy set out as under:
a. Order dated 2nd September, 20,813, passed by the Court of Small Causes at Mumbai in R.A.D. Suit No.1417 of 20,811 in the case of Bhavik Gems Vs. J.B. Diamonds Limited, in respect of Ofce Premises at 6B Unity House, 3rd foor, Prasad Chambers, Opera House, Mumbai-40,80,8 0,80,84;
b. Order dated 25th January, 20,816, passed by the Court of Small Causes at Mumbai in R.A.D. Suit No.1343 of 20,811 in the case of Bhavik Gems Vs. J.B. Diamonds Limited, in respect of Ofce Premises at Unit No.40,86, 4th foor, Prasad Chambers, Opera House, Mumbai-40,80,8 0,80,84;
c. Order dated 2nd September, 20,813, passed by the Court of Small Causes at Mumbai in R.A.D. Suit No.1416 of 20,811 in the case of J.B. Jewellery Pvt. Ltd. Vs. J.B. Diamonds Limited, in respect of Ofce Premises at Unit No.41e, 4th foor, Prasad Chambers, Opera House, Mumbai-40,80,8 0,80,84;
d. Order dated 9th May, 20,817, passed by the 15th Additional Senior Civil Judge, Surat, in Regular Civil Suit No.273 of 20,811 in the case of Riya Diamonds Vs. J.B. Diamonds Limited, in respect of factory premises No. 12, Patel Nagar, Ashwani Kumar Road, TP Scheme No.4, Surat;
e. Order dated 3rd September, 20,812, passed by the Small Causes Court at Surat in Small Rent Suit No.e6 of 20,812 and Order dated e th January, 20,813, passed by the Principal Senior Civil Judge, at Surat, in the Regular Civil Suit No.2e2 of 20,812 in the ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 6 / 41 OLR-22-2019.doc case of Bhavik Gems Vs. J.B. Diamond Ltd., in respect of Factory Building, 24e-249, Lambe Hanuman Road, Near Railway Station, Surat;
f. Order dated 9th May, 20,817, passed by the 15th Additional Senior Civil Judge, Surat, in Regular Civil Suit No.274 of 20,811 in the case of Meer Gems Vs. J.B. Diamonds Limited, in respect of factory premises Factory Building, Plot No.147 to 151, Pandoi Industrial Estatem Ved Road, Surat;
g. Order dated 9th May, 20,817, passed by the 15th Additional Senior Civil Judge, Surat, in Regular Civil Suit No.273 of 20,811 in the case of Bhavik Gems Vs. J.B. Diamonds Limited, in respect of Factory Building, Plot Nos.21 and 22, Nehru Nagar, Lambe Hanuman Road, B/H Railway Station, Surat ("the orders/decrees").
7. The orders/decrees were passed by the Courts after the date of the winding up order i.e., 19th June, 20,812. On 21st June, 20,81e, when the representative of the Ofcial Liquidator attempted to take physical possession of the properties in Mumbai, the tenants refused to hand over possession of the properties belonging to the Company (In Liquidation), and accordingly, the Ofcial Liquidator took symbolic possession of the following properties situated in Mumbai:
a. Ofce Premises at 6-B Unity House, 3rd foor, Prasad Chambers, Opera House, Mumbai-40,80,8 0,80,84, which was in possession of Bhavik Gems;
b. Ofce Premises at Unit No.40,86, 4th foor, Prasad Chambers, Opera House, Mumbai-40,80,8 0,80,84, which was in possession of Bhavik Gems;
c. Ofce Premises at Unit No.41e, 4th foor, Prasad Chambers, Opera House,
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Mumbai-40,80,8 0,80,84, which was in possession of J.B. Jewellery; and d. Part physical possession of approximately 50,8 sq. ft. of the Ofce Premises at Unit No.40,85, 4th foor, Prasad Chambers, Tata Road No.1, Swadeshi Mills Compound, Opera House, Mumbai-40,80,8 0,80,84, was taken on 24 th July, 20,812 and remaining 193 sq. ft. was merged into Unit No.40,86 at Prasad Chambers, Opera House.
e. The tenants on 23rd June, 20,81e, refused to hand over possession of the properties belonging to the Company (In Liquidation), and accordingly, the Ofcial Liquidator took symbolic possession of the following properties belonging to the Company (In Liquidation) situated at Surat:
a. FP No. 12, Patel Nagar, Ashwanikumar Road, TP Scheme No.4, Surat, which was in possession of Riya Diamonds;
b. Factory Building, 24e-249, Lambe Hanuman Road, Near Railway Station, RS No.46/A/2 Paikee TP Scheme No.4, FP No.249-A & 24e, Surat City, Ward, Navagam, Surat, which was also found to be in possession of Riya Diamonds; c. Factory Building, 24e-249, Lambe Hanuman Road, Near Railway Station, RS No.46/A/2 Paikee TP Scheme No.4, FP No.249-A & 24e, Surat City, Ward, Navagam, Surat, which was in possession of Bhavik Gems;
d. Factory Building, Plot No.147 to 151, Pandoi Industrial Estatem Ved Road, Surat. RS No. 9 & 10,8/1, Moje: Tunki, Tal: Choryasi, Dist: Surat, which was in possession of Meer Gems; and e. Factory Building, Plot No.21, 22, Nehru Nagar, Lambe Hanuman Road, B/ ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 8 / 41 OLR-22-2019.doc H Railway Station, Surat, Ward : Navagam. RS No.30,8, CS No.1722, 1723, TP Scheme No. 4, FP No. 234, 235, Surat, which was also found to be in possession of Bhavik Gems.
9. After taking symbolic possession of the above properties belonging to the Company (In Liquidation), the Ofcial Liquidator fled a compliance report dated 17 th July 20,81e before this Court, annexing all the orders / decrees produced by the tenants obtained from the Courts. The Ofcial Liquidator vide the compliance report also placed on record the minutes recorded by the representative of the Ofcial Liquidator at the time when he attempted to take possession of the above properties situated in Mumbai and Surat. In view of the compliance report being placed before this Court, by Order dated 12th December 20,81e, this Court was pleased to direct the ex-directors of the Company to remain present before this Court along with their Advocates on 17 th December, 20,81e at 3.0,80,8 p.m. 10,8. Accordingly, the ex-directors along with their Advocate were present before this Court on 17th December, 20,81e, when this Court was pleased to direct service of the compliance report on all the tenants, with a further direction for their respective partners/directors to remain present before this Court on 19 th December, 20,81e at 3.0,80,8 p.m.
11. On 19th December, 20,81e, Mr. Suresh Kukadiya and Mr. Bhagwanbhai Kukadiya, the Directors of J.B. Jewellery and the Partners of Bhavik Gems were present before this Court. Admittedly, Mr. Suresh Kukadiya and Mr. Bhagwanbhai ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 9 / 41 OLR-22-2019.doc Kukadiya are also the ex-directors of the Company. On 19 th December, 20,81e, this Court recorded the statements of Mr. Suresh Kukadiya and Mr. Bhagwanbhai Kukadiya. In order to safeguard the assets of the Company, the undertakings of Mr. Suresh Kukadiya and Mr. Bhagwanbhai Kukadiya were also recorded in the Order dated 19th December, 20,81e, to the efect that they shall not transfer their tenancy rights in favour of any party until further orders of this Court.
12. Thereafter, on 21st December, 20,81e, Mr. Deepak Kukadiya, Director of Riya Diamonds and Mr. Miral V. Surani, Partner of Meer Gems, were present before this Court. This Court accordingly recorded the statements of Mr. Deepak Kukadiya, Director of Riya Diamonds and Mr. Miral V. Surani, Partner of Meer Gems and also their respective undertakings to the efect that they shall not transfer their tenancy rights in favour of any party until further orders of this Court.
13. By Orders dated 19th December, 20,81e and 21st December, 20,81e, the tenants had also given an undertaking to produce (i) income tax returns from the year which they claim to be a tenant in respect of the premises, (ii) all statutory records where address of the premises is shown, of which they allegedly claim to be in possession and
(iii) the rent receipts issued by the said Company to the tenants in respect of the premises.
14. Accordingly, the tenants have fled their respective afdavits producing certain records. The record placed before me by the Ofcial Liquidator and the tenants reveal that:
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Nitin 10 / 41 OLR-22-2019.doc a. The ex-directors of the Company, save and except for Mr. Jivrajbhai Surani,
are the Directors of J.B. Jewellery Pvt. Ltd., who allegedly claim to be a tenant of ofce premises at 41e, 4th Floor, Prasad Chamber, Opera House, Mumbai - 40,80,8 0,80,84;
b. The ex-directors of the Company namely Mr. Sureshbhai Kukadiya, Mr. Rajeshbhai Surani, and Mr. Virjibhai Kukadiya, are also partners of Bhavik Gems, who allegedly claim to be in possession of premises No. 40,85 and 40,86, Prasad Chambers, Opera House, Mumbai - 40,80,8 0,80,84;
c. Mr. Deepak Kukadiya, Director of Riya Diamonds Pvt. Ltd. is the nephew of Mr. Bhagwanbhai Kukadiya, the ex-director of the said Company; d. Mr. Miral Surani, who claims to be a partner of Meer Gems is the son of Mr. Vallabhbhai Surani, the ex-director of the Company. Mr. Deepak Kukadiya is also a partner of Meer Gems, holding 35% in the said frm, whereas Mr. Miral Surani holds 65% in the frm;
e. Moreover, the Advocate who represented the ex-directors of the said Company before this Court on 17th December, 20,81e, is the same Advocate who also represents the tenants, who are none other than the ex-directors themselves and in some cases their family members.
15. It is pertinent to note that the record further reveals a shocking state of afairs. On 21st June, 20,81e, when the representative of the Ofcial Liquidator went to take physical possession of the premises at 6B, Unity House, 2 nd Floor, Opera House, Mumbai - 0,84, of which Bhavik Gems claims to be in possession, one Advocate Ms. ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 11 / 41 OLR-22-2019.doc Y.Y. Naik represented Bhavik Gems and informed the representative of the Ofcial Liquidator that by an Order dated 2nd September, 20,813, passed by the Court of Small Causes at Bombay in R.A.D. Suit No. 1417 of 20,811, the possession of the alleged tenant of the said premises was protected. Similarly, the objection was raised by the same Advocate once again on behalf of Bhavik Gems when the representative of the Ofcial Liquidator on 21st June, 20,81e, attempted to take physical possession of Unit Nos. 41e, Prasad Chamber, Opera House, Mumbai - 40,80,8 0,80,84, on the ground that by Order dated 25th January, 20,816, the Court of Small Causes at Bombay had protected the possession of Bhavik Gems.
16. Moreover, the same Advocate Ms. Y.Y. Naik had appeared for the Company (In Liquidation) before the Court of Small Causes at Bombay in R.A.D. Suit Nos. 1417 of 20,811 and 1416 of 20,811, her appearance whereof is recorded in the Orders dated 2 nd September, 20,813, passed by the Court of Small Causes at Bombay. These circumstances establishing fraud and collusion do not end here. In the Suits fled by Bhavik Gems and J.B. Jewellery, before the Court of Small Causes at Bombay, Mr. Suresh Kukadiya, the ex-director of the Company had led evidence on behalf of the tenants and on the other hand, the Company chose not to raise any substantial defence / lead any evidence / produce any documents to controvert the case of the tenants. This is evident from a bare perusal of the Orders dated 2 nd September, 20,813, and 25th January, 20,816 passed by the Court of Small Causes at Mumbai.
17. Before the Courts at Surat, the right of the Company (In Liquidation) to fle ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 12 / 41 OLR-22-2019.doc a reply were closed by the Courts. In fact on 2 nd September, 20,812, when an application for interim reliefs fled on behalf of one of the tenant, was kept for hearing, before the Court of Small Causes at Surat, none appeared on behalf of the Company and the Small Causes Court at Surat, was compelled to proceed ex-parte against the Company and the application for interim reliefs fled by tenant was allowed. 1e. It is in these circumstances, the Ofcial Liquidator fled the present report before this Court on 1st February, 20,819. Before dealing with the arguments canvassed before me, I shall frst refer to and deal with the Afdavits dated 12 th February, 20,819, fled by the tenants pursuant to the Orders dated 19 th December, 20,81e and 21st December, 20,81e, passed by this Court:
Bhavik Gems:
a. Bhavik Gems has fled an Afdavit of Mr. Suresh Kukadia dated 12 th February, 20,819. Mr. Suresh Kukadiya, Virjibhai Kalanyanbhai Kukadia, Mr. Vallabh P. Surani and Mr. Rajesh P. Surani are the partners of Bhavik Gems. All the partners of Bhavik Gems, save and except for Mr. Virjibhai Kukadia, are the ex-directors of the Company (in liquidation). Bhavik Gems claims to be in possession of four properties as a tenant belonging to the Company in liquidation viz. (i) Ofce Premises at 40,85/40,86 Prasad Chambers, Opera House; (ii) Ofce Premises at 6B, Unit House, Opera House; (iii) Factory Building, 234-235 at Surat; and (iv) Factory Building, 24e-249 at Surat.
b. Bhavik Gems claims to be in possession of the ofce premises at 40,85/40,86
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Prasad Chambers, Opera House, on basis of an oral agreement of the year 19e9. This ofce premises at 40,85/40,86 Prasad Chambers, Opera House, is the registered ofce of the Company. Bhavik Gems further claims to be in possession of the ofce premises at 6B, Unit House, Opera House, on basis of an oral agreement of the year 20,80,81. Bhavik Gems has further stated in the Afdavit that it acquired tenancy rights by way of an Agreement dated 11th November 1993 in respect of Factory Building, 234-235 at Surat. Bhavik Gems has further stated in the Afdavit that it acquired tenancy rights by way of an Agreement dated 5th August, 1996, in respect of Factory Building, 24e-249 at Surat; however, no copies of any such agreement has been produced by Bhavik Gems. Instead, Bhavik Gems has produced copies of Agreements dated 23 rd April, 20,814, which agreements make a reference to the dates of 11 th November, 1993 and 5th August, 1996, respectively. This clearly establishes that Bhavik Gems as late as 23 rd April, 20,814, after nearly two (2) years from the date when the Company was ordered to be wound up, entered into the agreements with the Company. Such dispositions of properties of the Company (In Liquidation) are void and being after the fnal winding up order are not even capable of validation.
c. Further, Bhavik Gems has produced some receipts for Unit Nos.40,85/40,86 Prasad Chambers, Opera House. Pertinently, Unit Nos.40,85/40,86, is the registered ofce of the Company in liquidation, and Mr. Suresh Kukadiya is the ex-director of the Company (In Liquidation), who is now representing Bhavik Gems before this Court. Bhavik Gems has not produced any rent receipts for Ofce Premises at 6B, Unit ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 14 / 41 OLR-22-2019.doc House, Opera House and/or for the factory premises at Surat. In paragraph 13 of the Afdavit, a statement has been made that a sum of Rs.6,0,80,8,0,80,80,8/- and Rs.4,0,80,8,0,80,80,8/- has been paid by Bhavik Gems to the Company in advance for use of the factory premises at Surat for 30,8 years. However, no proof of payment has been produced by Bhavik Gems before this Court.
d. Bhavik Gems has produced IT Returns from AY 1995-96 till 20,810,8-11 which refects the address of Ofce Premises at 40,85. Apart from producing some certifcates of registration and professional tax receipts issued by the Surat Municipal Corporation, Bhavik Gems has also produced a registration certifcate dated 23 rd June 20,80,85 of establishment issued by Surat Municipal Corporation, which registration certifcate bears a diferent address altogether.
J.B. Jewellery:
e. J.B. Jewellery has fled an Afdavit of Mr. Bhagwanbhai Kukadia dated 12 th February, 20,819. All the ex-directors of the Company in liquidation except Mr. Virjibhai Kukadiya are the directors of J.B. Jewellery. J.B. Jewellery claims to be a tenant of ofce premises at 41e, Prasad Chambers, Opera House, Mumbai. No agreement has been produced by J.B. Jewellery. Infact, it was Mr. Bhagwanbhai Kukadia who had made a statement before this Court on 19 th December 20,81e that J.B. Jewellery was a tenant of the Company since 20,811. It is an admitted position that J.B. Jewellery does no business and has hardly done any business since its incorporation. This position is even refected in the income tax returns fled by J.B. Jewellery for AY ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 15 / 41 OLR-22-2019.doc 20,80,84-0,85 to 20,817-1e.
f. If J.B. Jewellery was a tenant of the Company since 20,811, there is no explanation as to how and why the income tax returns fled by J.B. Jewellery for AY 20,80,84-0,85 to 20,80,89-10,8 refect the address of the premises. g. In view of the fact that all the ex-directors of the Company (in liquidation) except Mr. Virjibhai Kukadiya are the directors of J.B. Jewellery and that no agreement has been produced by J.B. Jewellery to establish its tenancy, no other document such as the Certifcates dated 3 rd January, 20,80,85 and 1st April, 20,80,86, issued by Ministry of Commerce and Industry and Central Sales Tax Department and/or the rent receipts from June 20,80,83 to December 20,810,8, would assist or take the case of J.B. Jewellery any further.
Riya Diamond Pvt. Ltd.('Riya Diamond'):
h. Riya Diamond has fled an Afdavit of Mr. Deepak Kukadia dated 12 th February, 20,819. Mr. Deepak Kukadiya, Mr. Rajeshbhai Vasani and Mr. Hiteshbhai Beladiya are the Directors of Riya Diamond. It is an admitted position that Mr. Deepak Kukadia is the nephew of Mr. Bhagwanbhai Kukadia, the ex-director of the Company in liquidation. Riya Diamond claims to be a tenant of the factory building at Plot No.12, A.K. Road, Patel Nagar at Surat.
i. Riya Diamond has placed reliance on three agreements dated 14 th February 20,80,87, 15th October 20,80,8e and 1st April 20,810,8, to establish creation of tenancy rights in its favour. In view of the collusion between the directors of Riya Diamond and the ex- ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 :::
Nitin 16 / 41 OLR-22-2019.doc directors of the Company, these agreements are disputed by the Ofcial Liquidator. In any event, even assuming that these agreements are in existence, as per Riya Diamondrs own case, the agreement dated 1st April, 20,810,8, was only up to 13th August, 20,814. There is no explanation as to how Riya Diamond is in possession of the premises after the expiry of the agreement dated 1st April, 20,810,8. j. Even otherwise, the agreements contradict the case of Riya Diamond. The Afdavit discloses that Riya Diamond was carrying on its business from the premises since the year 20,80,87. This is because Riya Diamond has produced income tax returns for AY 20,80,8e-0,89, 20,80,89-10,8, 20,810,8-11, 20,811-12, 20,812-13, 20,813-14, 20,814-15, 20,815-16, 20,816- 17, 20,817-1e. Apart from not having produced the Income Tax Returns for AY- 20,80,87- 20,80,8e; it is Riya Diamondrs own case in the Afdavit that the agreement dated 1 st April, 20,810,8, was valid till 13th August, 20,814. This then raises the serious doubt or question as to on what basis did Riya Diamond show this address in its Income Tax Returns of 20,815-16, 20,816-17, 20,817-1e. This question remains unanswered / unexplained. Even otherwise, Riya Diamond has not produced any rent receipts. k. In view of the above, no other statutory document such as the certifcate of registration dated 26th February, 20,80,87, issued under GVAT 20,80,83; license dated 1st January, 20,80,8e issued by Directorate Industrial Safety and Health, Gujarat; professional tax receipts dated 12 th October, 20,810,8, issued by Gujarat Municipal Corporation, would assist the case of Riya Diamond.
Meer Gems:
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Nitin 17 / 41 OLR-22-2019.doc l. Meer Gems has fled an Afdavit of Mr. Miral Surani dated 12 th February,
20,819. Mr. Deepak Kukadiya and Mr. Miral Surani are the partners of Meer Gems, holding 35% and 65% share, respectively. Mr. Miral Surani is holding 65% share in Meer Gems and he is the son of Mr. Vallabhbhai Surani, ex-director of the Company, whereas Mr. Deepak Kukadia is the nephew of Mr. Bhagwanbhai Kukadia, the ex- director of the said Company in liquidation. Meer Gems claims to be a tenant of factory building at plot No.147 to 151, Pandol Estate, Ved Road, Surat. m. Meer Gems has produced two agreements dated 30,8 th April 20,80,8e, and 11th March, 20,80,89. On a perusal of the agreement dated 11 th March, 20,80,89, it is clear that the same was valid till 2eth February, 20,819. No rent Receipts have been produced by Meer. Meer has produced income tax returns from AY 20,80,89-10,8 till 20,81e-19; the latest IT Returns fled by Meer for AY 20,81e-19 shows that Meer is not doing any business, but is incurring losses.
19. In light of the above facts and circumstances, Mr. Jagtiani, learned Counsel on behalf of the Ofcial Liquidator, contended that:
a. The decrees, were passed by the Courts without jurisdiction and having been procured by fraud and without obtaining leave under Section 446 of the Companies Act, 1956, can be set aside or disregarded at any stage and in any proceedings, even a collateral one. In support of his submission, Mr. Jagtiani placed reliance on the judgment of this Court in the case of Forbes and Company v.
Coromandel Garments Ltd., (2018) 5 Bom CR 550, wherein this Court in an Ofcial ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 18 / 41 OLR-22-2019.doc Liquidatorrs Report, while dealing with an issue of fraudulent preference derived by a party on basis of a consent decree, relied on the judgments of the Supreme Court of India in (i) S.P. Chengalvaraya Naidu v. Jagannath, (1994) 1 SCC 1; (ii) Sudarsan Chits (I) Ltd. v. Sukumaran Pillai, (1984) 4 SCC 657 and (iii) of a learned Single Judge of this Court in Modi Stone Ltd. (in liquidation), (2017) 202 Company Cases 551, and came to the conclusion that a decree which has been obtained by fraud can be declared illegal and void by the Company Court and such decrees which are obtained by fraud can be set aside at any stage and in any proceedings, even in collateral one. In fact, in Forbes and Company (supra), this Court had declared the consent decree as illegal and void as a fraudulent preference.
b. This Court in the case of Forbes and Company (supra) in paragraphs 26(d) and 26(f ) has held as under:
"(d). The Consent Decree in question, which has been procured by fraud can be set aside at any stage including in an application for leave to execute it or in an Ofcial Liquidator's Report challenging it...."
"( f ) In fact the judgment of the Division Bench of this Hon'ble Court in The Ofcial Liquidator, High Court Bombay and the Liquidator of Kamani Brothers Private Limited (In Liquidation) V. Suryakant Natvarlal Surati relied upon by applicant itself, is authority for the proposition that the Company Court may set aside or refuse to enforce a Decree....."
c. The judgment of Forbes and Company (supra) has been confrmed by the Division Bench of this Court vide its judgement and order dated 24 th September 20,81e, ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 19 / 41 OLR-22-2019.doc passed in Appeal No.331 of 20,81e in Company Application No.341 of 20,816. The Division Bench of this Court in paragraph 12 of the judgment has held as under:
"12. We have given careful consideration to the submissions. We have also perused the impugned order and the material on record. On analysis of the material on record as well as the legal position, which according to us has been correctly appreciated by the learned Company Judge, we see no good ground to interfere with the impugned order."
d. The Ofcial Liquidatorrs Report has been fled on the basis that the decrees have been obtained by collusion and fraud; therefore, in view of the law laid down by this Court in Forbes and Company (supra), the orders/decrees passed by the Courts in favour of the tenants having been procured by fraud, ought not to be enforced by this Court and this Court must declare the orders/decrees as illegal and void. e. The orders/decrees, on which the tenants have placed reliance on to contend that they are protected and hence cannot be dispossessed by the Ofcial Liquidator, in fact assists the case of the Ofcial Liquidator, since the same shows that the ex- director of the Company in liquidation Mr. Suresh Kukadia had led evidence on behalf of the plaintif therein (the tenants) and that the Company chose not to raise any defence to the Suits and even chose not to contest the suit or lead any evidence to controvert the case of the tenants.
f. A similar pattern, as stated above, is apparent from a bare reading of the order/ decrees obtained by the tenants from the Courts; that the Advocate for the tenants has ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 20 / 41 OLR-22-2019.doc not even attempted to dispute the position in respect of the apparent related party transactions between the ex-director of the Company and the tenants. g. Notwithstanding the above submissions, fundamentally, the Courts could not have passed the orders/decrees against the Company in liquidation since it did not have the requisite jurisdiction over the subject matter i.e., the Company in liquidation, by reason of the limitation imposed under Section 446 of the Companies Act, 1956. Admittedly, all the decrees have been passed by the Courts after the winding up order dated 19th June 20,812 and therefore, the Courts did not have jurisdiction to pass over the fnal decrees against the Company (in liquidation) in absence of leave under Section 446 of the Companies Act, 1956; that any decree passed by a court without jurisdiction, is 'coram non judicer.
h. Therefore, the decrees passed by the Courts are a nullity and have been passed without jurisdiction; and the Courts could not have taken up the cause or the matter in respect of the Company in liquidation in absence of leave under Section 446 of the Companies Act, 1956 and hence, any order passed by a court having no jurisdiction over the subject matter, is a nullity.
i. The above position in law is supported by the judgment of the Supreme Court of India in the case of Chief Engineer, Hydel Project & Ors. v. Ravinder Nath & Ors., (2008) 2 SCC 350. The Supreme Court in Hydel Project (supra) had relied upon its judgment in Harshad Chiman Lal Modi v. DLF Universal Ltd., (2005) 7 SCC 791, more particularly paragraph 30,8 thereof, in which the question of jurisdiction was being ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 21 / 41 OLR-22-2019.doc decided by the Supreme Court and whilst deciding the same, the Supreme Court in Harshad Modi (supra) held as under:
"30. We are unable to uphold the contention. The jurisdiction of a court may be classifed into several categories. The important categories are (i) territorial or local jurisdiction; (ii) pecuniary jurisdiction; and
(iii) jurisdiction over the subject-matter. So far as territorial and pecuniary jurisdictions are concerned, objection to such jurisdiction has to be taken at the earliest opportunity and in any case at or before settlement of issues. The law is well settled on the point that if such objection is not taken at the earliest, it cannot be allowed to be taken at a subsequent stage. Jurisdiction as to subject-matter, however, is totally distinct and stands on a diferent footing. Where a court has no jurisdiction over the subject-matter of the suit by reason of any limitation imposed by statute, charter or commission, it cannot take up the cause or matter. An order passed by a court having no jurisdiction is a nullity." [Emphasis Supplied] j. The Supreme Court in Harshad Modi's case (supra) in paragraph 32 has also held that:
"32. ....It is well settled and needs no authority that where a court takes upon itself to exercise a jurisdiction it does not possess, its decision amounts to nothing. A decree passed by a court having no jurisdiction is non est and its invalidity can be setup whenever it is sought to be enforced as a foundation for a right, even at the stage of execution or in collateral proceedings. A decree passed by a court without jurisdiction is a coram non-judice'."
[Emphasis Supplied] k. In respect of the diferent shades of meaning of the expression 'jurisdictionr, the Full Bench of the Calcutta High Court in the case of Hriday Nath Roy & Ors. v. Ram Chandra Barna Sarma & Ors., AIR 1921 Cal 34 (FB) (page 732), has held that:
"In the Order of Reference to a Full Bench in the case of Sukh Lal v. Tara Chand 33 C. 68 : C.W.N. 1046 : 2 C.L.J. 241 : 2 Cr. L.J. 618 it was stated that jurisdiction may be defned to be the power of a ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 22 / 41 OLR-22-2019.doc Court to hear and determine a cause, to adjudicate or exercise any judicial power in relation to it; in other words, by jurisdiction is meant the authority which a Court has to decide matters that are litigated before it or to take cognizance of matters presented in a formal way for its decision. An examination of the cases in the books discloses numerous attempts to defne the term "jurisdiction," which has been stated to be "the power to hear and determine issues of law and fact," "the authority by which judicial ofcers take cognizance of and decide causes," "the authority to hear and decide a legal controversy"; "the power to hear and determine the subject-matter in controversy between parties to a suit and to adjudicate or exercise any judicial power over them;" "the power to hear, determine and pronounce judgment on the issues before the Court, " ''the power or authority which is conferred upon a Court by the Legislature to hear and determine causes between parties and to carry the judgments into efect", "the power to enquire into the facts, to apply the law, to pronounce the judgment and to carry it into execution", Reference may in this connection be made to the discussion of the nature of jurisdiction in the judgments of this Court in Ashutosh Sikdar v. Behari Lal MANU/WB/0158/1907 : 11 C.W.N. 1011 : 6 C.L.J. 320 : 35 C. 61 (F.B.) and Gurdeo Singh v. Chandrika Singh 1 Ind. Cas. 913 : 36 C. 193 : 5 C.L.J. 611. This jurisdiction of the Court may be qualifed or restricted by a variety of circumstances. Thus, the jurisdiction may have to be considered with reference to place, value, and nature of the subject matter. The power of a tribunal may be exercised within defned territorial-limits. Its cognizance may be restricted to subject-matters of prescribed value. It may be competent to deal with controversies of a specifed character, for instance, testamentary or matrimonial causes, acquisition of lands for public purposes, Record of Rights as between landlords and tenants. This classifcation into territorial jurisdiction, pecuniary jurisdiction and jurisdiction of the subject-matter is obviously of a fundamental character. Given such jurisdiction, we must be careful to distinguish exercise of jurisdiction from existence of jurisdiction, for fundamentally diferent are the con-sequences of failure to comply with statutory requirements in the assumption and in the exercise of jurisdiction. The authority to decide a cause at all, and not the decision rendered therein, is what makes up jurisdiction, and when there is jurisdiction of the person and subject- matter, the decision of all other questions arising in the case is but an exercise of that jurisdiction." [Emphasis Supplied] ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 23 / 41 OLR-22-2019.doc l. The Calcutta High Court in Hriday Nath Roy (supra) while deciding whether the courts lose their jurisdiction by failing to act in accordance to the procedure and whether the order is a nullity if such procedure is not followed held that it depends on the nature of the prescribed procedure and if the court does not follow a mandatory procedure it loses jurisdiction and the order is then a nullity.
m. By placing reliance on the judgments of the Supreme Court in Hydel Project (supra), Harshad Modi (supra) and the Full Bench of the Calcutta High Court in Hriday Roy (supra), it was submitted that the Courts at the time of passing the decrees did not have the requisite jurisdiction over the Company in liquidation, since the Company was ordered to be wound up on 19 th June 20,812 and due to the limitation imposed under the Companies Act, 1956, being the leave required to be obtained under Section 446 thereof, which was intentionally not obtained, the orders/decrees passed by the Courts were without jurisdiction and hence coram non judice.
n. To substitute his argument, Mr. Jagtiani gave the example of a case where the court exercises its jurisdiction in a suit to pass a decree, fled in a representative capacity, without following the procedure under Order I Rule e of the Code of Civil Procedure, 190,8e, the proceedings itself would be invalidated by virtue of the mandate prescribed under Order I Rule e. Resultantly, the decree passed by the court in that suit would be a decree in nullity. Similarly, in case where a suit is fled on two causes ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 24 / 41 OLR-22-2019.doc of action namely one for infringement and another one for passing of before the Court, and no leave under Clause XIV of the Letters Patent is obtained by the Plaintif for joinder of several causes of action, any order / decree passed by the court in that suit would be a nullity and therefore invalid.
o. In the event the purported tenants would have applied for leave under Section 446 of the Companies Act, 1956, this Court would have had the opportunity to examine the reason for seeking such a leave to prosecute suits against the Company in liquidation and this Court would have dealt with the collusion and fraud, which are writ large, and would have directed the proceedings to be heard before it. Intentionally, the ex-directors of the company in liquidation did not fle / apply for any leave under Section 446 and are at this stage attempting to obstruct the Ofcial Liquidator from taking custody of the properties of the company.
p. This Court cannot lose sight of the fact that the decrees which have been obtained by the purported tenants are in fact for the beneft and advantage of the ex- directors of the Company (in liquidation).
20,8. During the course of oral submissions, the Ofcial Liquidator made a disclosure that a letter dated 14th October, 20,813, was received by the ofce of the Ofcial Liquidator from the tenants, wherein references were made to the pending suits fled by them against the Company in liquidation. However, due to sheer inadvertence, there was no response from the Ofcial Liquidator. Mr. Jagtiani submitted that the letter dated 14th October, 20,813, will not in any manner dilute the collusion and fraud ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 25 / 41 OLR-22-2019.doc committed at the behest of the ex-directors of the Company in liquidation with the tenants and that the same would not discharge the tenants from its obligation to approach this Court for seeking leave under Section 446 of the Companies Act, 1956. Mr. Jagtiani placed reliance on a judgment of this Court in the case of M/s. Magnasound India Ltd. (in Liquidation), in Ofcial Liquidator's No.188 of 2014, wherein this Court vide its judgment and order dated 21 st October, 20,815, held as under:
"29. The fact that the Ofcial Liquidator did not reply to the letter dated 9.5.2011 by which Shashi Gopal purported to inform the OL that he intended to exercise a power of sale in respect of the hypothecated securities is also of no consequence. The Ofcial Liquidator has adverted to the circumstances in which his Ofce failed to rely to the said letter. Even otherwise, a secured creditor is not entitled to rely on the silence of the Ofcial Liquidator to exercise a unilateral right of sale without reference to the Company Court. The Ofcial Liquidator is merely an ofcer of the Court and acts under its directions. If the letter dated 9.5.2011 had come to his notice at the time of its receipt, he would have had little choice but to place the matter before the Company Court by means of a report for further directions. On such a report being placed, this Court would have had the opportunity to consider the question and to issue appropriate directions to safeguard the interests of the workers and other creditors of the Company. In the absence of any response from the Ofcial Liquidator, Shashi Gopal as the subrogee was duty bound to move this Court for appropriate directions in the matter of sale of the hypothecated securities. He certainly was not entitled to assume that he was free to deal with the securities in any manner that he pleased."
21. Per Contra, Mr. Sarathy, learned Advocate appearing for the tenants contended that:
a. The absence of leave under Section 446 does not render the decree a nullity ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 26 / 41 OLR-22-2019.doc and that the same is not fatal to the decree obtained by the tenants from the various Courts.
b. The Company Court has no jurisdiction to declare a decree passed by the small causes court as null, void and not binding, in view of the law laid down by a Division Bench of this Court in the case of Modella Woollens Ltd. Vs. Ofcial Liquidator, (2006) 1 BOM CR 276, and more particularly paragraph 36 thereof, which reads as under:
"36. In the light of the clear principle of law laid down in this decision we are of the view that the Company Court had no jurisdiction to declare, in the present case, that the decree passed by the Court of Small Causes was null, void and not binding on the applicant. Admittedly, the applicant had not instituted any proceedings against the company in Liquidation. It had also no claim against the applicant which could be continued against the Ofcial Liquidator. Nor was a prayer made to transfer any pending proceeding by or against the company in liquidation. Additionally, as noted above, it is the applicant which has approached the Company Court. It has claimed reliefs principally against the appellant before us which is not a company in liquidation. Ultimately, the declaration as claimed afects the appellant before us. As to how at the instance of the applicant the Company Court could have nullifed the decree passed in favour of the appellant before us in its limited jurisdiction, is not clear to us at all. Impleading the company in liquidation through Ofcial Liquidator is also of no assistance in this case once the nature of the rights of the company in liquidation in the subject premises is appreciated. Unless and until the Company Court was of the view that the tenancy rights constitute asset for the purposes of liquidation proceedings, it could not have taken cognizance of the company application. In indirect and oblique manner, the Company Court could not have recorded any fnding on the nature of rights of the company in liquidation. The Company Court could not have in such process pronounced upon rights of the appellant before us. Once there is a doubt expressed about right, title and interest of the company in winding-up, in respect of subject premises, there was no occasion for ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 27 / 41 OLR-22-2019.doc the Company Court to have gone into the legality and validity of the decree passed by Court of Small Causes. Merely because the premises are public premises, according to the applicant, is also not of any relevance once these basic and fundamental aspects of the matter are appreciated and taken into consideration."
22. In rejoinder, Mr. Jagtiani submitted that the judgment passed by the Division Bench of this Court in Modella Woollens (supra) has no relevance or application to the facts of the present case. He submitted that in Modella Woollens (supra), the application for declaring the decree passed by the Court of Small Causes, Mumbai, as a nullity and bad in law was made on behalf of a party other than the Ofcial Liquidator. He further submitted that there was no plea raised by either party that the Small Causes Court (in facts of that case) did not have jurisdiction over the subject matter of the company in liquidation (due to the failure to obtain leave under Section 446 of the Act) and that any decree / order passed by the Small Causes Court would be coram non judice. He further submitted that in paragraphs 12 and 14 of the said judgment, the submission as regards jurisdiction have been recorded and the same are substantially diferent than the arguments canvased by the Ofcial Liquidator before this Court.
23. Mr. Jagtiani argued that the contentions raised on behalf of the Applicant in Modella Woollens (supra) was that (i) for the Small Causes Court to have jurisdiction to go into the Plaint, it was necessary that the second respondent (in that case) proves that license fees or a charge was paid in respect of the subject premises and that there was a subsisting license and (ii) by virtue of Section 15 of the Public ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 28 / 41 OLR-22-2019.doc Premises (Eviction of Unauthorised Occupants) Act, 1971, the Small Causes Court had no jurisdiction and competence and therefore the decree was in nullity not binding upon the Applicant. It is in the aforesaid circumstances, the powers of the Company Court under Sections 446 and 536(2) of the Companies Act, 1956, were invoked to seek a declaration that the second respondent was a trespasser and that the decree is vitiated by fraud and therefore a nullity. It is in the facts of that case, the Division Bench of this Court in Modella Woollens (supra) held that the Company Court had no jurisdiction to take cognisance of the company application and pass any orders / directions in favour of the Applicant before it.
24. Mr. Jagtiani submitted that the judgment of Indian Bank v. Ofcial Liquidator, Chemmeens Exports (P) Ltd. reported in (1998) 5 SCC 401, referred to in Modella Woollens (supra), also would not assist the case of the tenants since Indian Bank (supra) was a case where leave had already been granted under Section 446 of the Companies Act to a creditor to prosecute the suit, in which Ofcial Liquidator had been joined.
25. I have heard the learned Advocates for both the parties and have perused the Ofcial Liquidatorrs Report, the Afdavits dated 12 th February, 20,819, fled on behalf of the tenants and have considered the oral submissions made by the parties and the Judgments relied upon by them. I am inclined to allow the Ofcial Liquidatorrs Report for more than one reason.
26. The record before me reveals gross collusion between the ex-directors of the ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 29 / 41 OLR-22-2019.doc Company in liquidation and the directors/partners of the tenants. All the suits referred to above have been fled by the tenants in the year 20,811, which is the same year in which the Company Petition was fled against the Company under Sections 433 and 434 of the Companies Act. It is during that time, the tenants, claiming a right in the assets of the Company (in liquidation), approached the Courts in Mumbai and in Surat, where the various assets of the Company are situated and obtained orders/decrees from the Courts, which forms the underlying basis on which the tenants are claiming protection and have obstructed the Ofcial Liquidator from taking possession of the assets of the Company in liquidation.
27. It is an admitted fact that the properties are the assets of the Company in liquidation. Hence, under the scheme and the provisions of the Companies Act, 1956, this Court is required to protect the assets of the Company in order to not defeat the rights of the workers and the creditors of the Company. As noted above, the record reveals a shocking state of afairs, which supports the stand of the Ofcial Liquidator of the collusion and fraud on part of the ex-directors of the Company and the tenants. The relationship between the ex-directors of the Company and the directors/partners of the tenants is not in dispute. It is also not in dispute that the orders/decrees passed by the Courts are passed after the order of winding up was passed by this Court on 19 th June, 20,812. In view of the record and facts extensively dealt by me above, it can be hardly contended by the tenants that the orders/decrees were not collusive and/or that no fraud was played by the tenants and the ex-directors of the Company on the Courts ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 30 / 41 OLR-22-2019.doc in Mumbai and Surat.
2e. The orders/decrees, referred to above, clearly show that the ex-director of the Company in liquidation Mr. Suresh Kukadia led evidence on behalf of the tenants before the Small Causes Court at Mumbai in the Suits fled by the tenants against the Company in liquidation. It is relevant to refer to the observations made by the Small Causes Court at Mumbai in its judgment and order dated 2 nd September, 20,813, in R.A.D. Suit No.1417 of 20,811, in the case of Bhavik Gems Vs. J.B. Diamonds:
":REASONS:
5. The plaintif has lead oral as well as documentary evidence in support of its contention.
The plaintif has examined P.W.1 Mr. Suresh Kukadia, its Director at Exh.21 and produced various documents viz. resolutions at Exh.23 and Exh.24, rent receipts at Exh.25 to Exh.34, letter dated 26/8/2011 at Exh.35, complaint to police at Exh.36 in support of its contention.
As against, the defendant has not lead any oral as well as documentary evidence in support of its contention.
Heard argument advanced by the learned counsel for plaintif to this suit. The oral as well as documentary evidence produced by the plaintif on record of this suit is discuss hereinafter issue-wise.
6. .......
7. ......During cross examination the defendant and its counsel remains absent before this Court and does not cross examine to P.W.1. The defendant has also not lead any oral as well as documentary evidence in respect of its contention. Therefore, the oral as well as documentary evidence produced by the plaintif on record of this suit corroborates with each other remains unchallenged and unrebutted. I therefore, no any reason to discard or disbelieve the same....Therefore, adverse inference also drawn against the defendant. Thus, I hold that defendant is interefering and obstructing in the ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 31 / 41 OLR-22-2019.doc peaceful possession of the suit premises of the plaintif to deprive its right. Hence, I answer this Issue No.1 in the afrmative.
8. The defendant has admitted in it written statement that plaintif is a tenant and defendant is its landlord in respect of the suit premises. In view of the express admission of the defendant, the plaintif is entitled for declaration that it is the tenant of the defendant in respect of the suit premises. Hence, I answer this Issue No.2 in the afrmative."
29. Similar observations have also been made by the Court of Small Causes at Bombay in its judgments dated 2 nd September, 20,812 and 25th January, 20,816, in R.A.D. Suit No.1416 of 20,811, fled by J.B. Jewellery Pvt. Ltd. against the Company and R.A.D. Suit No.1343 of 20,811 fled by M/s. Bhavik Gems against the Company, respectively. In both these cases as well, Mr. Suresh Kukadia, ex-director of the Company, led evidence on behalf of the tenant. In respect of the orders/decrees passed by the Courts at Surat, as noted above, the right to fle a response/pleadings of the Company was closed by the Courts and accordingly the orders were passed since the same was not contested by the Company.
30,8. In light of the collusion and fraud, both of which are writ large, there is merit in the Ofcial Liquidatorrs reliance on the judgement of Forbes and Company (supra), more particularly paragraphs 26(d) and 26(f ). I am in agreement with the view taken by the learned Single Judge of this Court in Forbes and Company (supra). As held by the Supreme Court of India in S.P. Chengalvaraya Naidu (supra), a judgment or decree obtained by playing fraud on the court is a nullity and non-est in the eyes of law and that such a judgment / decree, "passed by the frst court or the highest court", has to ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 32 / 41 OLR-22-2019.doc be treated as a nullity "by every court, whether superior or inferior". Such judgments / decrees can be challenged in any court even in collateral proceedings. This position of law has been reiterated by this Court in Forbes and Company (supra).
31. Mr. Jagtiani for the Ofcial Liquidator has contended that the orders / decrees passed by the Courts in favour of the tenants having been procured by fraud, ought not to be enforced or taken cognizance of, even as a defence to the Ofcial Liquidatorrs Report by this Court and this Court must declare the orders/decrees as illegal and void. On the other hand, the Advocate for the tenants has not dealt with or even responded to the submissions made on behalf of the Ofcial Liquidator in respect of the collusion and the fraud committed by the ex-directors of the Company and the tenants. The only submission which has been canvassed on behalf of the tenants is that the Division Bench of this Court in Modella Woollens (supra) has held that the Company Court has no jurisdiction to declare a decree passed by the Small Causes Court as null, void and not binding.
32. The judgment of the Division Bench of this Court in Modella Woollens (supra) will not assist the case of tenants for more than one reason. Firstly, the ratio in Modella Woollens (supra) have no relevance or application to the facts of the present case. In Modella Woollens (supra), the application for declaring the decree passed by the Court of Small Causes, Mumbai, by which the second respondent (in the facts of that case) was held to be a deemed tenant, as a nullity and for setting aside of the said decree, was made on behalf of a party other than the Ofcial Liquidator. Secondly, the ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 33 / 41 OLR-22-2019.doc Applicantrs case in Modella Woollens (supra) was that (i) for the Small Causes Court to have jurisdiction to go into the Plaint, it was necessary that the second respondent (in that case) proves that license fees or a charge was paid in respect of the subject premises and that there was a subsisting license and (ii) by virtue of Section 15 of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, the Small Causes Court had no jurisdiction and competence and therefore the decree was in nullity not binding upon the Applicant. Thirdly, the company in liquidation was not the owner of the premises; it was only claiming tenancy rights in respect thereof. This is certainly not the case before me. The Ofcial Liquidator has fled the report inter alia seeking directions against the tenants from vacating the premises, which is admittedly owned by the Company and hence constitutes an 'assetr of the Company. It would be relevant to reproduce the observations made by the Division Bench in paragraphs 32, 33 and 34 in Modella Woollens (supra):
"32. In the present case the undisputed fact is that post nationalisation of the Insurance business the subject premises stood vested in the applicant and therefore, according to them, assumed character of "public premises". The submission proceeded on the basis that the Public Premises Eviction Act applies to the premises in question. By virtue of it's character as public premises and the Public Premises Eviction Act prevailing over the Bombay Rent Act, the Court of Small Causes had no jurisdiction, authority and power to pass any decree in respect thereof. The further basis upon which the learned Judge proceeded is that the premises in question would be an asset and property of the company in liquidation and therefore, the Ofcial Liquidator was bound in law to take possession thereof. The third assumption on the part of the learned Judge is that the Court of Small Causes passed a decree in a collusive suit inasmuch as without any evidence ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 34 / 41 OLR-22-2019.doc of relationship of licensor and licensee and any threat of eviction a declaration of deemed tenancy came to be issued by it. This declaration could not have been issued since requirements stipulated by Section 15A of the Bombay Rent Act namely subsistence of licence and payment of licence fee or charge as on the relevant date have not been satisfed in the present case.
33. It is pertinent to note that company application has not been instituted by the Ofcial Liquidator. He does not claim any declaration of the nature claimed by the applicant much less any direction that the property be delivered to him. At the instance of the applicant who has a distinct right, title and interest in the premises based upon its character as public premises, it is extremely doubtful as to whether the learned Judge could have passed any orders on the company application. More so, when there is a further doubt as to whether the relationship of licensor and licensee which is claimed by the company in liquidation and the appellant before us, would be covered by the Public Premises Eviction Act, 1971. The forum, in this case, was elsewhere. Either it was the Court of exclusive jurisdiction or the Civil Court which ordinarily has such authority.
Consequent upon termination of rights of the persons in occupation of public premises the Authority (Estate Ofcer) is empowered to issue appropriate directions including order of eviction. At the instance of the applicant who is the owner of the entire building and the subject premises, the learned Judge could not have gone into these aspects and proceed to quash and set aside the decree of the Court of Small Causes.
34. True it is that conduct of the appellant as well as the company in liquidation is reprehensible and deserves to be strongly deprecated. However, such conduct alone would not clothe the Company Court with the necessary jurisdiction, power and authority in law. The Company Court was exercising jurisdiction within four corners of the Companies Act, 1956. It had before it the company petition for winding up upon which an order came to be passed of appointment of Provisional Liquidator and thereafter Ofcial Liquidator. It has wound up the company. It may be that during the course of winding up the Liquidator has powers to take charge of all assets and properties and therefore, whenever he acts in furtherance of such powers those will be subject to directions that may be issued in that behalf by the Company Court. However, the question remains as to whether any directions could have been ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 35 / 41 OLR-22-2019.doc sought by him in respect of subject premises. That aspect is also not free from doubt inasmuch as tenancy rights of the company in liquidation may be "property" in law but for the purposes of winding up, they have been held to be not constituting an "Asset". Admittedly, the company in liquidation is not the owner of the premises. It is claiming tenancy rights in respect thereof. Therefore, whether such tenancy rights could have been taken over by the Liquidator is also not clear from the order of learned Single Judge. In fact, reliance placed by Mr. Madon in this behalf on the decision of Supreme Court in the case of Smt. Nirmala R. Bafna v. Khandesh Spinning and Weaving Mills Co. Ltd. is appropriate. The Hon'ble Supreme Court was considering some what similar controversy in that case. That matter was carried from an order passed by this very Court. The Hon'ble Supreme Court after noticing rival contentions has observed that:-
(a) The tenancy rights the company had in the said fat may not be an asset for the purpose of liquidation proceedings, and
(b) merely because a company goes in liquidation and a liquidator/ofcial liquidator is appointed, the rights of the company vis-a-vis its landlord and/or its tenants do not undergo any change."
[emphasis supplied]
33. I am also in agreement with the submission made by Mr. Jagtiani that the judgment of Indian Bank (supra), referred to in Modella Woollens (supra), also would not assist the case of the tenants since Indian Bank (supra) was a case where leave had already been granted under Section 446 of the Companies Act to a creditor to prosecute the suit, in which Ofcial Liquidator had been joined.
34. It was urged by Mr. Jagtiani that the Courts at the time of passing the orders/decrees did not have the requisite jurisdiction over the Company in liquidation due to the limitation imposed under Section 446 of the Companies Act, 1956, and ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 36 / 41 OLR-22-2019.doc hence, the orders/decrees passed by the Courts being without jurisdiction is coram non judice. In support of the above submission, reliance was placed on the judgments of the Supreme Court in Hydel Project (supra), Harshad Modi (supra) and the Full Bench of the Calcutta High Court in Hriday Roy (supra). The learned Advocate on behalf of the tenants has not even attempted to argue to the contrary or distinguish the judgments relied on behalf of the Ofcial Liquidator.
35. The submission on behalf of the Ofcial Liquidator is that the court which passes orders against a company in liquidation, does not possess the requisite jurisdiction over the subject matter i.e. the company in liquidation, in view of the limitation imposed under Section 446 of the Companies Act. However, even after the Ofcial Liquidator fled the above report, the tenants have not fled any such application before this Court seeking leave under Section 446 of the Companies Act.
36. The only defence raised by the tenants in their afdavits is that since the date on which the suits were fled before the respective Courts, the order of winding up of the said Company was not passed by this Court and hence, the question of seeking leave of this Court 'was not necessitatedr. This contention of the tenants is contrary to the language of Section 446(1) of the Companies Act, which, inter alia, reads as under:
"446. Suits stayed on winding up order.
(1) When a winding up order has been made or the Ofcial Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 37 / 41 OLR-22-2019.doc may impose...."
37. In view of the above, the contention of the tenants cannot be accepted, since the same is contrary to the language and purport of Section 446(1) of the Act. In the event the tenants would have applied for leave under Section 446 of the Companies Act, 1956, this Court would have had the opportunity to examine the reason for seeking such a leave to prosecute suits against the Company in liquidation. The powers of a Company Court under Section 446 of the Act are not in dispute and are well settled and have been broadly construed by the Supreme Court in the case of Sundarsan Chits (I) Ltd. (supra). Since the suits fled by the tenants would constitute a claim fled against the Company in liquidation, under Section 446(2) of the Companies Act, this Court would have considered hearing the suits in order to advance the object of Section 446 of Companies Act.
3e. Since I have already come to the conclusion that the orders/decrees obtained by the tenants from the Courts are collusive and fraudulent and without jurisdiction as no leave under Section 446 of the Companies Act was obtained, no post facto leave under Section 446 of the Companies Act can otherwise validate the collusive orders/decrees obtained by the tenants and/or save them from being declared as illegal and void. The admitted fact that the ex-director of the Company in liquidation had led evidence on behalf of the alleged tenants before the various Courts and that the ex-directors of the Company in liquidation were fully aware about the winding up order dated 19 th June, 20,812, passed by this Court, cannot be ignored. This in fact goes to the very root of the ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 38 / 41 OLR-22-2019.doc submission of the Ofcial Liquidator viz. collusion and fraud.
39. Even in respect of the letter dated 14th October, 20,813, produced by the Ofcial Liquidator before me, I am of the view that the same will neither dilute the collusion and fraud committed at the behest of the ex-directors of the Company in liquidation with the tenants; nor does this letter absolve the Plaintifs in the various suits from applying for leave under Section 446 of the Companies Act. The observations made in the judgment and order dated 21 st October, 20,815 in the case of M/s. Magnasound India Ltd. (in Liquidation), in Ofcial Liquidator's No.188 of 2014, will apply to the facts of this case as well.
40,8. During the course of hearings which were held before me, a common Order dated eth April, 20,815, passed by the Division Bench of this Court in Writ Petition (L) Nos. 70,84 of 20,815, 70,85 of 20,815, 70,87 of 20,815 and 713 of 20,815 fled by Mr. Sureshbhai Kukadiya, M/s. Bhavik Gems, J.B. Jewellery Pvt. Ltd. and Mr. Vallabhbhai Surani, was brought to my attention. These petitions were fled by some of the tenants and the ex-directors of the Company being aggrieved by an order passed by the Metropolitan Magistrate under Section 14 of the SARFAESI Act, permitting the bank to take physical possession of the properties in question. The Division Bench of this Court in the said Order has observed in paragraphs 10,8, 11 (inadvertently referred to as '12r in the Order) and 12 as under:
"10. We are satisfed that after going through the documents like passport, the learned Magistrate was justifed in not accepting contention of the Petitioners. Learned Magistrate has not granted the protection to the ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 ::: Nitin 39 / 41 OLR-22-2019.doc Petitioners, pursuant to the directions given by the Apex Court in the case of Harshad Govardhan Sondagar (supra) and thereafter passed an order under Section 14 of the said Act.
12. In our view, the ratio of the judgment in the case of Harshad Govardhan Sondagar (supra), more particularly law laid down, in paragraph 36 is binding on this Court. Therefore, the learned Magistrate, in our view, has rightly passed order under Section 14 of the said Act. We are informed that the total amount due is more than Rs. 200 Crores. Amount due to the consortium banks is Rs.1,000 Crores, out of which 60% amount may be adjusted, according to the Petitioners. Be that as it may. We are of the view that no case is made out for interference with the impugned order. All the writ petitions are, therefore, dismissed. Learned counsel submitted that proposal for payment of 60% amount was given under the OTS scheme.
12. At this stage, learned counsel appearing for the Petitioners seeks four weeks time to approach the Apex Court for the purpose of clarifcation of the order passed in the case of Harshad Govardhan Sondagar (supra). Taking into consideration the fact that Petitioners are the Directors, guarantors and also signatory to the loan documents, we are not inclined to continue the interim order. Hence, request for continuation of interim relief is declined."
41. Being aggrieved by the Order dated e th April, 20,815, the tenants and the ex- directors of the Company preferred Special Leave Petition Nos. 1175e/20,815, 11761/20,815, 11764/20,815 and 11762/20,815 before the Supreme Court of India, which petitions came to be dismissed by the Apex Court vide its Order dated 24 th April, 20,815. In view thereof, the Order dated e th April, 20,815, passed by the Division Bench of this Court, having attained fnality, it can be hardly contended by the alleged tenants that they are protected tenants in law. Even otherwise, the alleged tenants have failed to make out any case which would warrant this Court to direct the Ofcial Liquidator not to take physical possession of the assets of the said Company. ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 :::
Nitin 40 / 41 OLR-22-2019.doc
42. It may not be out of place to mention that the modus operandi of the ex- directors as seen above has become a regular practice amongst the ex-directors of companies in liquidation to obstruct the Ofcial Liquidator from taking possession of the assets of the company in liquidation, and the same is required to be dealt with frmly. The rights of the workers and the creditors of the Company (in liquidation) cannot be jeopardized due to the bogus tenancies created by the ex-directors of the Company (in liquidation). It is required to be borne in mind that the partners / directors of the tenants are the family members of the ex-directors of the said Company and hence, their actions are nothing short of an act of fraud.
43. In these circumstances:
a. The orders/decrees passed by the Courts in favour of tenants declaring them to be tenants, as noted in paragraph 6 above, are a nullity in the eyes of law and are declared illegal and void, as being coram non judice and hence not binding on the Ofcial Liquidator of the Company (in liquidation);
b. The tenants are directed to handover physical possession of the properties set out in paragraphs 7 and e above within a period of one (1) week from the date of uploading this Order;
c. The Ofcial Liquidator is permitted to break open the lock put up by the ex-
management of the Company (in liquidation) on the premises being Ofce Space No.e120,8, Bandra Kurla Complex, Bandra (E), Mumbai - 40,80,80,851;::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 :::
Nitin 41 / 41 OLR-22-2019.doc d. the Ofcial Liquidator will be at liberty to take necessary assistance of the
Police Authorities, in the event any obstruction is caused by the tenants, or by any ofcer, servant, representative or any person acting on behalf of the tenants;
e. the Ofcial Liquidator shall fle a compliance report reporting compliance of the directions passed hereinabove, at which time, the Ofcial Liquidator will be at liberty to seek reliefs in terms of prayer clauses (b) and (c) prayed for in the report.
44. The Ofcial Liquidatorrs Report is accordingly disposed of in the above terms.
45. All parties to act on an authenticated copy of this order.
( S.J.KATHAWALLA, J. ) ::: Uploaded on - 30/08/2019 ::: Downloaded on - 31/08/2019 03:17:58 :::