Uppalapati Satyanarayana Vara Prasad vs Jvg Finance And Ors. on 6 September, 2012

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Delhi High Court

Uppalapati Satyanarayana Vara Prasad vs Jvg Finance And Ors. on 6 September, 2012

1. All these appellants had entered into separate Agreements to purchase plots of land from the respondent company. These agreements are of date much prior to the filing of the winding up petition or passing of the order appointing Official Liquidator as Provisional Liquidator qua the respondent company. Certain payments were also made by the appellants before the filing of the said winding up petition. Reserve Bank of India vide order dated 18.10.1997 restrained the company in liquidation from accepting deposits or alienating any assets except for the purpose of repayment of deposits. However, it transpires that even after the winding up orders were passed and the Official Liquidator was appointed as Provisional Liquidator, one Col. M.J. Ganapathy, claiming himself to be the Project Director and authorized representative of the company took further payments and executed sale deeds in favour of the appellants.

2. When the respondent company was functioning, it had entered into a large number of transactions pertaining to land or otherwise, and large number of claims were made by the so-called purchasers. The learned Company Judge set up a one man Committee to look into those claims. Claims of the appellants were also examined by the said Committee. The Committee has given the finding that the agreements were entered into before the date of the filing of the petition; however, since balance payments were taken, after the Order of the Reserve Bank of India, sale deeds in favour of these appellants were bad in law.

3. The applicants approached the learned Company Judge by filing application under Section 536(2) of the Companies Act to validate the said sale Co. App. No.16/2012 & Ors. Page 10 of 12 deeds. It was on the ground that all these appellants were bona fide purchasers; they did not know about the passing of the Order dated 18.10.1997 by the RBI or the Order of this Court dated 05.6.1998 appointing the Provisional Liquidator; they had paid the entire consideration for the plots in question as per the Agreements to Sell and therefore, it was a fit case for passing the Order under Section 536(2) of the Companies Act.

4. It cannot be disputed that sale consideration paid by the appellants to Col. Ganapathy and received by him on behalf of the company was without any authority of law. Likewise, the sale deed executed in favour of the appellants will also be of no avail being of a date after the passing of the Orders by the RBI and of appointment of Provisional Liquidator. However, at the same time, the learned Company Judge could go into the question as to whether the appellants are bona fide purchasers of the property in question or not.

5. As pointed out above, even the one man Committee has accepted the validity of the Agreements to Sell which were executed much prior to the filing of the winding up petition. In these circumstances, the learned Company Judge could go into the question as to whether the appellants are bona fide purchasers and even if the consideration paid by them to Col. Ganapathy was not valid, whether the sale deed can be validated after receiving the balance consideration. All these questions are not determined by the learned Single Judge while dismissing the application of the appellants under Section 536(2) of the Companies Act.

6. During the pendency of these appeals, some new facts have also come to the notice of this Bench. It is pointed out by the learned counsel for the Official Liquidator that the Income Tax Department had passed attachment order dated 04.9.1998, i.e., after the appointment of the Provisional Liquidator but before the execution of the Sale deeds. Mr. Bahl also points out that the Co. App. No.16/2012 & Ors. Page 11 of 12 learned Company Judge has referred the matter to Serious Fraud Investigation Office, report whereof is awaited. The said report shall also have bearing on the outcome of these applications.

7. For all these reasons, we set aside the impugned orders of the learned Company Judge and remit the case back to the Company Judge for decision on merits in the light of the observations made by us in this Order and also taking into consideration the attachment by the Income Tax Department as well as findings given by the SFIO.

8. Applications filed by the appellants shall be listed before the learned Company Judge for directions on 14th September, 2012, the date already fixed by the Company Judge.

9. All these appeals are disposed of in the aforesaid terms.

ACTING CHIEF JUSTICE RAJIV SAHAI ENDLAW, J SEPTEMBER 06, 2012 pmc Co. App. No.16/2012 & Ors. Page 12 of 12

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Delhi High Court