TaxTMI 
TaxTMI 
2006 (4) TMI 266
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....ng of Official Liquidator Report No. 53 of 2002. 2. In support of the aforesaid Judge's Summons, an affidavit dated 1-3-2004 of Kiran N. Gajjar, proprietor of Kingsway Graphics, the applicant, has been filed. 2.1 In the said affidavit, it was stated that Piramal Financial Services Ltd., was taken into liquidation and was ordered to be wound up vide order of this Court dated 10-5-2000 and Official Liquidator was appointed to take charge of the assets of the company (in liquidation). Pursuant to the order of this Court dated 20-7-2001 directing the official liquidator to take charge of the properties of the company (in liquidation) the representative of the Official Liquidator was deputed on 16-8-2001 to the premises F-6A at World Business House, Ahmedabad, to take possession of it. It is the case of the applicant Kiran Gajjar that the premises F-6A being owned by him it was informed to the Official Liquidator that the premises was purchased by him from Prarthana Construction Pvt. Ltd. (hereinafter referred to as "Prarthana"). In support of the same, the applicant had submitted a copy of the booking letter, possession letter and a copy of share certificate in the name of Ceazer....
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.... noted that in that case the applicant has filed a further affidavit dated 20-10-2004 and filed written submissions and made elaborate submissions in this behalf. The applicant and respective parties have made the following submission : Contention of Kiran Gajjar - applicant : 3.1 The applicant is seeking right, title and interest in the premises F-6A admeasuring 300 sq. ft., being a bona fide purchaser and on the following grounds : (a)Premises F-6A is a released premises. (b)No charge is existing on premises F-6A creating any encumbrances on right, title and interest of premises F-6A in favour of Piramal Financial Services Ltd. (in liquidation) (c)No valid mortgage exists restricting right, title and interest of premises F-6A, between Prarthana and Piramal. Bona fide purchaser : 3.2 The applicant has further submitted that the applicant is a bona fide purchaser of the property for value without notice. The transaction impeached in respect of premises F-6A admeasuring 300 sq. ft., by way of booking and allotment to the applicant by Prarthana is made in good faith and for valuable consideration without any notice. 3.3 The premises F-6A was transferred to the....
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....any (in liquidation) to be made available for the benefit of the creditors. 3.7 It is the case of the applicant, that he never knew of the loan agreement entered upon between Prarthana and Piramal which took place subsequent to booking made by the applicant in the year 1993. 3.8 It was further submitted that the payment of consideration amount was made by the applicant from 1993 to 1996 and this clearly establishes the fact that the applicant has acted in good faith without any knowledge of loan agreement entered upon between Prarthana and Piramal. 3.9 It is further submitted that the actual possession of premises F-6A was always vacant whenever the applicant visited the premises and also when the applicant took possession. The applicant states that the Commissioner's report dated 1-5-1998 at page 120 of the paper book, para 3, made on application of Piramal clearly states that F-6A portion is released and it is found locked since possession was never taken by Piramal. 3.10 It was further submitted that the applicant had no notice of any kind of transaction between Piramal and Prarthana. There was no registered loan agreement existing and the companies had not complied ....
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....ramal has charge over the premises F-6 admeasuring 1163 sq. yds. less part of F-6 - 604. Prarthana addressed another letter dated 11-12-1997 to Piramal and stated that Prarthana, has interest to sell the said premises and therefore requested Piramal to release the same from the charge, as Prarthana, is offering Business Convention Centre admeasuring 1800 sq. ft. on 8th floor of the scheme World Business Houses. It was also stated that as a special case Prarthana, should be permitted to keep the keys of main Hall and bath room and pantry. A further letter dated 17-12-1997 was written in which it was also stated that Prarthana shall arrange for finance which is offered to Piramal as Security. 3.16 In view of the aforesaid correspondence it was stated that release of portion of F-6 of 604 sq. ft. Business Convention Centre of 1800 sq. ft. was accepted by Piramal. Estoppel : 3.17 The learned advocate also raised the contention of doctrine of promissory estoppel. She relied upon section 115 of the Indian Evidence Act in this behalf which reads as under : "115. Estoppel. - When one person has, by his declaration, act or omission, intentionally caused or permitted another pers....
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....completed transfer. So far facts of the present case are concerned, there was an agreement of loan (at page No. 220 of paper book of Civil Suit No. 2146 of 1998) whereby various premises were agreed to be furnished as security against the amount taken for six months. 3.21B In view of the aforesaid submissions, it was submitted that a mere contract in the form of loan agreement would not amount to an actual transfer of any interest in the immovable property. It is only when deed of mortgage is duly registered, would operate as a conveyance of such interest. In support of the same, the learned advocate has relied upon the judgment of Madras High Court in the case of Pandit Shiva Rao v. D.A. Shanmughasundaraswami, Official Liquidator AIR 1940 Mad. 140. 3.21C In absence of any mortgage deed duly registered, the unregistered loan agreement remains within the domain of a contract. Therefore, so long as it is inchoate, it is a contract enforceable by specific performance. The learned advocate further submitted that the intention of parties so far as F-6A of 604 sq. ft., is concerned was that it was "released" from charge under loan agreement and therefore was never intended as "secu....
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....he applicant submitted that Prarthana - opponent No. 1 herein is a Company incorporated under the Companies Act was engaged in the activity of estate developers, construction, organizers of residential and non-residential premises and amongst such activities, was engaged in constructing one building of office premises known as "World Business House" situated near Parimal Garden, Ellisbridge, Ahmedabad. In the month of April 1997 Prarthana approached Piramal for short-term finance loan of Rs. 75 lakhs and Piramal agreed to give loan and Prarthana agreed to give in security by way of booking and allotting any premises in the scheme "World Business House". G-7 (Ground Floor) 1149 sq.ft. F-6 (First Floor) 1163 sq.ft. 3.27 Prarthana and Piramal agreed for further short-term finance loan of Rs. 50 lakhs against security of two other premises in the same scheme. F-5 First Floor 1366 sq.ft. F-7 First Floor 1426 sq.ft. 3.28 In view of the aforesaid fact, the allotment letter, possession letter share certificates were deposited as title deeds in the form of security towards loan. Therefore, the allotment letter, possession letter, share certificates are ancillary papers giv....
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.... the document will be the sole evidence of its terms. In such a case the deposit and document both form integral parts of transaction and are essential ingredients in the creation of mortgage. It follows that in such a case the document which constitutes the bargain regarding security requires registration under section 17 of the Indian Registration Act, 1908. 3.33 In support of the aforesaid contention, the learned advocate for the applicant has relied upon the following judgments : (1)Veeramachineni Gangadhara Rao v. Andhra Bank Ltd. AIR 1971 SC 1613 particularly which reads as under : '. . .Therefore, the crucial question is : Did the parties intend to reduce their bargain regarding the deposit of the title deeds to the form of a document? If so, the document requires registration. If on the other hand, its proper construction and the surrounding circumstances lead to the conclusion that the parties did not intend to do so, then, there being no express bargain, the contract to create the mortgage arises by implication of the law from the deposit itself with the requisite intention, and the document being merely evidential does not require registration." (p. 1619) (2)....
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....of Prarthana Construction. 4. On behalf of Prarthana Mr. Sunit Shah, learned advocate appears. He has tried to support the contention of the applicant in this behalf. The learned advocate submitted that the contention of the Official Liquidator of Piramal is that OL is entitled to take possession of office premises No. F-6A occupied by Kiran Gajjar. In support of the said contention, the Official Liquidator has further contended that Prarthana had given the said office premises by way of security to Piramal for the advances made to them. 4.1 The learned advocate submitted that Piramal had filed Civil suit being Civil Suit No. 2146/1998 in the City Civil Court at Ahmedabad wherein notice of motion was taken out and the trial Court was pleased to grant interim relief against transfer of said office premises No. F-6 and therefore Prarthana could not have allotted 300 sq. ft., out of the said premises to Kiran Gajjar, Official Liquidator is entitled to take possession in this behalf. 4.2 The aforesaid contention is opposed by Kiran Gajjar and also Piramal. Their contention is that 604 sq. ft., of said office premises No. F-6 was released by Piramal in 1997 and therefore Prarth....
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.... the release on the ground of non-fulfilment of promise. Under the circumstances, in Civil Suit No. 2146 of 1998 there is no prayer for setting aside the release. The OL cannot travel beyond averments made in the Civil Suit No. 2146 of 1998 or the prayers made therein by Piramal. 4.5 The next question is whether there was any injunction against the transfer of released property of 604 sq. ft. If terms of interim order are seen, it categorically refers to security and hence said 604 sq. ft., being not a part of security when notice of motion was moved, there cannot be any injunction and as such Prarthana was entitled to deal with the said property. 4.6 It may further be appreciated that there was already an allotment made to Kiran Gajjar. For the sake of brevity details with regard to allotment to Kiran Gajjar are not repeated (which was given by Kiran Gajjar in his argument). Even otherwise also, if there was already an agreement for allotment of premises any subsequent allotment cannot be bad. Under the circumstances, contention of OL is misconceived and deserves to be rejected. 4.7 It was submitted that Prarthana adopts rest of the contentions made by Kiran Gajjar in thi....
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....mpany in liquidation will give further short-term finance of Rs. 50 lakhs. It was agreed that Prarthana, would give further security by way of booking and allotting two other premises in the World Business House, namely, F-6 (first floor) admeasuring 1366 sq. ft. and F-7 (first floor) admeasuring 1426 sq. ft. However, in the present proceedings the dispute relates to shop No. F-6 and as such details about the other security are not being furnished here. 5.4 As per the agreement Prarthana, was to repay the said two loans by way of 10 (ten) fortnightly instalments. It appears that Prarthana, paid certain amounts towards the said loans but did not pay regularly the remaining instalments as per the agreement. 5.5 Prarthana, vide its letter dated 30-9-1997 requested the company in liquidation to give said Prarthana possession of approximately 700 sq. ft. out of the premises Nos. F-6 and F-7 on the first floor and promised that it will clear the repayment of the loans by 20-10-1997. It was also stated that Prarthana, will provide in alternative the security of Business Convention Centre on the top floor of the building known as "World Business House". In view of the aforesaid arran....
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.... ft. (604 sq. ft. released 559 sq. ft. remaining) F-7 First Floor 1426 sq. ft. Business Convention Centre (Top floor) 1800 sq. ft." 5.9 Company in liquidation also preferred a Notice of Motion being Exh. 5/6. On 8-4-1998, Chamber Judge, City Civil Court, Ahmedabad was pleased to pass following orders below Notice of Motion : "Civil Suit No. 2146/98 Order below Notice of Motion :- Heard L.A., for the plaintiff. Perused the papers. The plaintiff has shown from the documents produced on record that defendants have committed default in repayment of finance given to them. The plaintiff also apprehends that defendants are likely to transfer or dispose of the suit property with intention to defraud the plaintiff and thereby affect the right of the plaintiff. Delay in granting the relief may cause hardship to the plaintiff. Hence following interim order : 'Urgent show-cause notice to the defendants to be made returnable on 15-6-1998. In the meantime the defendants are directed to maintain status quo as on today with respect to property described in para 23-A'." 5.10 It may be stated that para 23-A of the Notice of Motion is in respect of....
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....aintain status quo was passed on 8-4-1998, and injunction was granted on 17-12-2000. The learned advocate further submitted that applicant Kiran Gajjar has stated in the affidavit in para 5 that on 19-6-2000, pursuant to the booking and allotment possession of premises F-6A was handed over to him as proprietor thereof. The possession letter dated 19-6-2000, was given to him. However, the said possession letter dated 19-6-2000, is not produced by him. In absence of such letter it is to be presumed that the contention of the applicant could not be believed in this behalf. 5.15 The learned counsel further submitted that it may be seen that status quo order was passed on 8-4-1998, and the order of injunction was passed on 28-8-2001. It was submitted that the order dated 28-8-2001, is in continuance of the earlier order of status quo granted by this Court. As stated hereinabove, once order of injunction or status quo is passed by this Court or competent Authority, parties are bound to maintain the status in respect of the suit property as existing on the date when the order was passed. In the present case order was passed on 8-4-1998. It was submitted that on 8-4-1998, the said prope....
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....ided on 22-12-1998 as under : "Section 293(1)(a) of the Companies Act, 1956, requires a company not to sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company except with the consent of the public company in its general meeting. That consent is to be obtained after informing the shareholders accordingly, in the meeting to be held for that purpose. Any such business would be a special business under section 173(1)(b) of the Companies Act and where such a business is to be transacted, it is mandatory that a statement setting out the material facts concerning each such item of business (including, in particular, the nature of the concern or interest, if any therein, of any director and the manager, if any) is to be annexed to the notice of the meeting. That is the requirement of section 173(2) of the said Act. In the present case, although a meeting was called, the shareholders were completely kept in dark of the order passed by the Supreme Court restraining any disposition of property and required that the property should be kept intact and available for clearing the dues of ONGC. However, in the facts of the present case, an agre....
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....nces, for the reasons stated above, I hold that the alleged power of attorney given to Rajesh Jaykrishna does not bind the company in liquidation since it is in breach of the undertaking given to the Hon'ble Supreme Court and for non-compliance with section 293(1)( a) of the Companies Act, 1956, apart from being in breach of the expressed stipulation in the clearance given by the State Government under the provisions of Urban Land Ceiling Act. No rights can flow therefrom as against the company and the sale deeds executed on the strength thereof cannot be enforced against the company. The possession by the Official Liquidator of these properties is perfectly legal and justifiable. In the circumstances, no declaration as sought by the applicants that they are bona fide purchasers can be given nor can the Official Liquidator be directed to lift his attachment on the company's property. Similarly, no suit could lie to enforce these documents against the company." (p. 844) 5.21 The learned counsel further submitted that in the case of Rutuja Estate & Investment (P.) Ltd. v. O.L. of Ambica Mills Ltd. [O.J. Appeal No. 116 of 1998] when the matter was heard by Division Bench of this Co....
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....the case of Rushvi Estate & Investments (P.) Ltd. (supra). In view of the aforesaid it is submitted that transfer by Prarthana Construction Pvt. Ltd. is contrary to and inconsistent with the status quo order granted and as such pursuant to the said transfer or handing over possession to Shri Kiran Gajjar, Shri Kiran Gajjar cannot claim any title in this behalf. In view of the same, it is submitted that Company Application No. 75 of 2003 be rejected with costs. Conclusion : 6. I have considered the rival contentions made on behalf of applicant Kiran Gajjar as well as Prarthana Construction. I have also considered the averments made by Mr. R.M. Desai, learned counsel on behalf of the Liquidator. From the record it appears that Prarthana by its letter dated 30-9-1997 requested company in liquidation i.e. Piramal to give possession of approximately 700 sq. ft., out of the premises bearing Nos. F-6 and F-7 on the First Floor and stated that it will clear payments by 20-10-1997. It was also stated that Prarthana will provide in alternative the security of business Convention Centre on the top floor of the building known as "World Business House". In view of the aforesaid arrangemen....
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....ch record this Court does not believe the contention of the applicant that applicant has obtained the lawful possession in this behalf. 6.5 Even as per Kiran Gajjar-applicant herein the possession of the premises was handed over to him on 19-6-2000 from the proceedings the status quo order was passed on 8-4-1998. Thus, the order dated 28-8-2001 is in continuance of the earlier order of status quo granted on 8-4-1998 by the Civil Court. Once the order of injunction or status quo was passed by the competent Court, the parties are bound to maintain status quo in respect of the suit property as existing on the date when the order was passed. From the date of status quo dated 8-4-1998 the property bearing F-6 was security to Piramal and Prarthana was not in possession of the said property. On passing of the order of status quo Prarthana cannot deal with or dispose of the property in question in respect of which status quo was granted by the competent Court. From the order of Civil Court it appears that the status quo granted was in respect of F-6 and other properties as mentioned in the Notice of Motion for which I have already mentioned above in this behalf. 6.5A What is status q....
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....facts of the case and in view of the two judgments of learned Single Judge and one Division Bench judgment of this Court, any dealing of the property in question when the order of status quo granted by the competent Court is bad in law and therefore the action of Kiran Gajjar to give the property to Prarthana is illegal and contrary to the order of the competent Court and therefore Prarthana cannot derive any title from Kiran Gajjar, and therefore entire transaction is vitiated and therefore once the applicant cannot transfer the same and if the applicant transfers the same, the same is contrary to the order of the competent Court, the said transaction is bad in law and therefore Prarthana cannot derive any title in this behalf. 6.8 The object of an appointment of provisional liquidator is the protection and preservation of the assets of a company pending an order for winding up, but the power of the Court is not limited to that contingency alone and the Court has jurisdiction to appoint a provisional liquidator in any proper case. One of the objects of appointment of provisional liquidator is to preserve and protect the property of the Company. Section 453 of the Act provides f....
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.... purpose of winding up of the company. The liquidator has the power to sell properties either by public auction or by private sale. 6.10 It is incorrect to say that the Official Liquidator steps into the shoes of the Company on a winding up order being passed. It is also incorrect to say that the admission by the Company is binding upon the Official Liquidator after the winding up order is passed. It appears that the entire contention of the applicant to that effect is based on misconception as to the position of the Official Liquidator. The Official Liquidator is a whole time officer attached to each High Court appointed by the Central Government. He has to conduct the proceedings in winding up the company and perform such duties as the Court may impose. (Section 451). He has to take in his custody or under his control all the properties of the Company and all the properties of the Company shall be deemed to be in the custody of the Court from the date of winding up order. [Section 456(1) and (2)]. He has the power to do all things as may be necessary for the winding up the affairs of the company and distributing its assets [Section 457(1)(e)]. After making the winding up order....