TaxTMI 
TaxTMI 
2009 (1) TMI 479
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....n the applicant and the Company - Piramal Financial Services Ltd., reflected in the memorandum of understanding dated 1-9-1999 is not void against the Liquidator and also to declare that the same is valid within the meaning of section 531/531A of the Companies Act, 1956. 3. Since both these applications are interconnected and would affect the outcome of one another, the same are heard together and disposed of by this common judgment and order. 4. In Company Application No. 172 of 2008 it is the case of the Official Liquidator that the company, namely, PFSL was incorporated and registered under the Companies Act, 1956. Due to mismanagement and unhealthy features in the working of the company as well as non-fulfilment of its financial because of serious liquidity crisis, the Reserve Bank of India presented winding up petition under the provisions of Reserve Bank of India Act. This Court vide its order dated 21-10-2000 admitted the petition and appointed Official Liquidator as Provisional Liquidator of the Company. Several other winding up petitions being Company Petition No. 296 of 1999, Company Petition No. 297 of 1999 and Company Petition No. 298 of 1999 were filed on 18-10-1....
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....the authorised signatory of Decimal Systems Pvt. Ltd. that the company will surrender and handover possession of office premises in question being office No. 107 situated at First Floor, Devpath Complex, C.G. Road, Ahmedabad - 380 006, unconditionally on or before 30-6-2007. This Court has, therefore, passed an order on 13-4-2007 directing Decimal Systems Pvt. Ltd. to handover possession on or before 19-4-2007. Pursuant to the said order, Decimal Systems Pvt. Ltd. handed over the possession of the premises No. 107 on 19-4-2007. The Official Liquidator sealed the office premises and affixed his board in the parking space. 8. Decimal Systems Pvt. Ltd. filed an affidavit dated 27-4-2007 stating that the office premises Nos. 102 to 106 are not in actual possession of the respondent No. 1 but the same are in occupation and possession of Alphanso Enterprises. The possession of the premises was handed over to by Mr. Apurva Doshi and Ms. Shefali Doshi by memorandum of understanding dated 1-9-1999 entered into between the company in liquidation of the first part, Mr. Apurva Doshi jointly with Ms. Shefali Doshi of the second part and Dev Enterprises by and thorough sole proprietor Mr. San....
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.... an authorised signatory and the Director of the respondent No. 1. On this affidavit, it is submitted by Mr. Nanavati that on 15-9-1999, the day on which the respondent No. 1 hired the premises Nos. 102 to 107 from the company in liquidation and for the same rent note was executed. At the relevant point of time the respondent No. 1 had preferred H.R.P. Suit No. 1063 of 2000 as the respondent No. 1 apprehended forcible dispossession of the suit premises, for which the learned Small Causes Court, Ahmedabad had granted ex parte ad interim relief on 29-8-2000, in respect of the office premises Nos. 102 to 107 on behalf of PFSL. Mr. M.V. Subramaniam-stating to be the authorised signatory filed a written statement and affidavit-in-reply dated 5-9-2000 emphatically denying any threat or cause to disturb the possession of the respondent No. 1. On 22-11-2000, the respondent No. 1 preferred an application to withdraw the said suit. At no point of time, the respondent No. 1 had claimed the title over the property. It was the case of tenancy right from the inception, which also has stood relinquished alongwith possession as on 19-4-2007. 12. Mr. Nanavati further submitted that on the basis ....
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....d even before the respondent No. 2 acquired physical possession of office premises Nos. 102 to 106, executed a rent note dated 15-9-1999 in favour of the respondent No. 1, in respect of office premises Nos. 102 to 107 of the said Devpath Complex on the date of execution of the said rent note dated 15-9-1999 the company - PFSL was in actual physical possession of the office premises Nos. 102 to 107 and the same was also recorded in the rent note dated 15-9-1999. The rent note dated 15-9-1999 also contemplated the use of common facilities/amenities by the respondent No. 1. The respondent No. 1 came in actual possession of office premises Nos. 102 to 107 on execution of the said rent note dated 15-9-1999. Thereafter, on 19-1-2000, before notice came to be issued by Jani and Company, Solicitor on behalf of the respondent No. 2 for the purpose of ascertaining the title/inviting objections in respect of office premises Nos. 102 to 106. Thereafter, the said Jani and Company issued a title certificate dated 19-2-2000 in respect of office premises Nos. 102 to 106. Around 29-8-2000, the respondent No. 1 filed in the Court of the Small Causes Court at Ahmedabad H.R.P. Suit No. 1063 of 2000 ag....
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....dent No. 1 having paid rent of office premises to the company-PFSL. The actual physical possession of the respondent No. 1 was further established and confirmed in view of the averments and admission made by the respondent No. 1 in the plaint of its own suit being H.R.P. Suit No. 1063 of 2000. 17. Mr. Vakil has further submitted that there was possibility of collusion between the respondent No. 1 and the Company - PFSL more particularly, considering the nature of the pleadings in the suit as well as written statement and the manner in which the said H.R.P. Suit No. 1063 of 2000 came to be withdrawn unconditionally. He has further submitted that though ordinarily question of actual physical possession would be purely a question of fact requiring leading of evidence, the fact and the record establishes beyond reasonable doubt that the actual physical possession of office premises Nos. 102 to 106 has been that of the respondent No. 1. He has, therefore, submitted that the Company Application No. 172 of 2008 deserves to be dismissed insofar as respondent No. 2 is concerned and the direction to pay mesne profit is required to be issued only to the respondent No. 1. 18. Without pre....
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....ndings dated 7-9-1999 and 8-9-1999 came to be executed between Valor Finstock Pvt. Ltd. (through M.V. Subramanyam) and the Company - PFSL (through Ashish Patel). The rent note dated 15-9-1999 was executed by the Company - PFSL in favour of Decimal in respect of office premises Nos. 102 to 107. However, in the said rent note the Company - PFSL is described as the lessor. It is also stated that the Company - PFSL/lessor is absolutely seized and possessed of or otherwise well and sufficiently entitled as owner of office premises Nos. 102 to 107. Thus, it is not on record as to what transpired after 1-9-1999 and before 15-9-1999. That in the rent note dated 15-9-1999 the Company - PFSL came to be described as lessor and also as owner of the office premises Nos. 102 to 106. 21. Mr. Vakil has further submitted that the Official Liquidator in his reply has also made a reference to Suit No. 2137 of 1998 wherein Dev Enterprises, Shri Sanjay Chandrakant Amin and Shri Ashish Patel were the defendants. The consent decree dated 18-8-1999 has been passed in the said suit. He has submitted that the documentary evidence are not on record reflecting the transactions between Dev Enterprises/Devla....
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.... - PFSL within a period of six months immediately preceding the date of presentation of the winding up petition, the same cannot be treated/deemed a fraudulent preference of a creditor and may not be treated invalid accordingly. 24. To make good this point he further submitted that the title of the Company - PFSL to office premises Nos. 102 to 106 itself is in doubt. The Official Liquidator has not produced any document on record to even remotely suggest that the Company - PFSL was undisputedly the owner of office premises Nos. 102 to 106 having a clear and a marketable title free of all encumbrances. The Company - PFSL was claiming to have right of disposal over office premises Nos. 102 to 106 as on 1-9-1999 when the memorandum of understanding dated 1-9-1999 was executed in favour of Ms. Shefali Doshi and late Apurva Doshi. It was, therefore, clear that Dev Enterprises/Devland Developers Pvt. Ltd., was required to sign the memorandum of understanding dated 1-9-1999 as a confirming party. On 15-9-1999, the Company - PFSL claimed to have ownership right over the office premises Nos. 102 to 106 as ascertained in the rent note dated 15-9-1999 and, therefore, the said Dev Enterpris....
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....that there must be a clear intention to shield the assets against the claims of other creditors of the Company - PFSL and the same was entered into with a view to defraud the creditors and that there was a common intention between the transferor Company - PFSL and transferee. Reliance is placed on the decision of the Hon'ble Supreme Court in the case of N. Subramania Iyer v. Official Receiver AIR 1958 SC 1. He has further submitted that the claim of Ms. Shefali Doshi and late Mr. Apurva Doshi over the amount of Rs. 8,17,000 is undoubtedly genuine and if that be so, the transaction forming subject-matter of the memorandum of understanding dated 1-9-1999 cannot be impeached. It is now well recognized and the proposition is not contested that if a debtor prefers one creditor to another on account of pressure that may be put upon the debtor, the payment cannot be regarded as fraudulent preference. It is the dominant motive that impels a debtor to make a transfer of some of its property in favour of one of the creditors, that decides the issue whether the transfer amounts to fraudulent preference or not. The onus is upon the person who impugns the transaction as being a fraudulent prefe....
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....se. A probe into the debtors mind and a assessment of various motives that animate human conduct is thus involved. Since the inference relates to dishonesty or something approaching dishonestly, there must be solid grounds for drawing it. Only if the circumstances proved are not equally consistent with guilt or innocence, the benefit of doubt goes to the accused. Suspicion, however, strong, will not be sufficient, if there is room for more explanations than one. For the debtors conduct, an intent to prefer cannot be inferred in the absence of direct evidence. There is no fraudulent preference if the payment or the transfer is not voluntary. The payment of debts/transfer of property by a company under a threat of legal proceedings or under a reasonable apprehension of such proceedings does not amount to showing of preference. Reliance is placed on the decision of Kerala High Court in the case of Official Liquidator v. Victory Hire Purchasing Co. (P.) Ltd. [1982] 52 Comp. Cas. 88. 28. Mr. Vakil has further submitted that it is too well settled that to constitute fraudulent preference the dominant motive in the mind of a Company as represented by its directors should be to prefer a....
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....lar to the facts in the said decision. In the said decision disposition was of the flats by a registered document while in the present case disposition is of office premises by way of memorandum of understanding. In the said case this Court has held that disposition of the flats is fraudulent preference and held that the sale as void. In view of the said decision, the present application is required to be rejected. 31. Mr. Desai further submitted that any transaction relating to immovable property of value of more than Rs. 100 is required to be effected by a document bearing the proper stamp duty and registered with the Sub-Registrar of Assurance of the District where the property is situated. Admittedly memorandum of understanding is not a deed or document by which property can be transferred. It is a settlement and/or understanding between the parties but does not create any title in favour of person to whom it is to be transferred. The memorandum of understanding does not bear proper stamp duty and is not registered with the Sub-Registrar of Assurance. In this view of the matter, he has submitted that there is no transfer of any immovable property nor does it create any title....
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....carry the case of Ms. Shefali Doshi any further, since there is no document bearing proper stamp duty registered with the Sub-Registrar of Assurances. He has, therefore, submitted that the application deserves to be rejected. 35. Having heard learned advocates appearing for the respective parties and having considered the pleadings made by them in both these applications and having gone through the relevant statutory provisions as well as the decided case law on the subject, the Court is of the view that the recovery of mesne profit from the respondents in Company Application No. 172 of 2008 largely depends upon the outcome in Company Application No. 582 of 2008. If the Court takes the view that the office premises Nos. 102 to 106 are validly transferred in favour of late Apurva Doshi and Ms. Shefali Doshi under the memorandum of understanding dated 1-9-1999 and the said transaction is not hit by the provisions contained in sections 531, 531(A) and 536(2) of the Companies Act, there is no question of recovery of any mesne profit either from Ms. Shefali Doshi or from Decimal Systems Pvt. Ltd. The Court is, therefore, much concerned about the prayers made in Company Application No....
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....t the transaction had taken place on 7-5-1999 i.e., within a period of six months previous to the date of presentation of the first petition, namely, on 21-10-1999. In view of section 441(2) of the Companies Act, winding up of the Company shall be deemed to commence at the time of the presentation of the petition for the winding up. So the date of commencement of the winding up was 21-10-1999, the date of the earliest winding up petition. Therefore, the transfer date 7-5-1999, of the flats clearly fell within six months from the date of presentation of the winding up petition. The Company had not shown whether it had published any advertisement in the newspaper about the sale of the property and whether it had received any other offer. The sale of the property was far below the cost of acquisition. The valuation report did not inspire any confidence because the valuation as on 7-5-1999, had been done only on 16-2-2002 and the valuation report also did not show how the value was arrived at. Moreover, the company had paid the entire amount before the maturity period. The company had made cash payments to the purchasers on the date of sale, though in fact the company had no capacity t....