TaxTMI 
TaxTMI 
2009 (3) TMI 569
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....on No. 726 of 1998 was filed by M/s. Kunal & Co., a partnership firm registered under the Indian Partnership Act seeking an order for winding up of the Appellant-company and an order for appointment of Official Liquidator as a Liquidator of the company was also sought. 3. In the petition, it was averred that the Appellant-Company was incorporated on 17-2-1982 under the Companies Act, 1956 as a private company, limited by shares. The registered office of the Company was at Mumbai. The authorised share capital was Rs. 3,00,000 divided into 30,000 equity shares of Rs. 10 each. The issued, subscribed and paid-up share capital of the Appellant Company was Rs. 2,07,000 divided into 20,700 equity shares of Rs. 10 each, fully paid-up. The objects of the Company as set out in the Memorandum of Association were to carry on business, own, buy, sell, possess, develop, construct, demolish, rebuild or otherwise deal in lands and buildings and to do other ancillary things in relation to the aforesaid objects as set out in detail in the Memorandum of Association. It was contended that the Company was indebted to Kunal for a sum of Rs. 3,91,54,538 being the balance of the amount lent and advance....
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....r-Kunal as on 31-3-1998 with further interest thereon at the rate of 18 per cent p.a. with quarterly rests from 1-4-1998 till payment. 7. It was averred that the Appellant-Company had admitted and acknowledged its liability to the petitioner-Kunal and also confirmed the correctness of the amounts due to the petitioner-Kunal by executing confirmation of the accounts as on 31-3-1995. That the company had also admitted and confirmed the correctness of the interest accrued on the principal amount up to 31-3-1996 vide its letter dated 27-3-1996. The company has also confirmed the correctness of the balance due to the Petitioner-Kunal as on 30-9-1996 by executing a confirmation of the accounts. Lastly, the company had further admitted and acknowledged its liability to the petitioner-Kunal in its accounts and the balance sheet for the year ended 31-3-1996. It was contended that in view of these admissions there was no dispute whatsoever about the liability of the Company to the petitioner. 8. That since the Appellant-Company failed and neglected to make payment to the petitioner-Kunal after February-1995 either towards repayment of the principal or the interest due, the petitioner-K....
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.... to seeking quick remedy in an inappropriate forum. The Appellant-Company's relation with the Petitioner-Kunal was not that of borrower and lender. The Petitioner-Kunal entered into a business deal through its nominee Shri Ramesh T. Khanchandani in pursuance of the agreement dated 28-3-1994 entered into between (i) Shri K.K. Motwani, (ii) Shri Manohar T. Makhija and (iii) Shri Ramesh T. Khanchandani. The said Mr. Makhija and Mr. Khanchandani who were non-resident Indians (NRIs) were introduced to the deponent by one Shri Sunil Mirpuri who was an agent and broker in real estates. That the Company was incorporated on 17-2-1982 by the deponent, his brother and a close friend with an authorised capital of Rs. 3,00,000 for development and construction business. Though there were several business proposals, none had materialised for want of an appropriate land site. On 19-1-1994 an appropriate authority of the Income-tax department held an auction of a property at Worli and the Company made a successful bid at the price of Rs. 21,75,00,000. The Company paid Rs. 10 lakhs as earnest money to the appropriate authority. At the time of the bid, there were great potentialities and bright prosp....
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....d interest @ 18 per cent per annum will be paid by the Company thereon. It was submitted that the petitioner-Kunal was a nominee of the aforesaid Shri Ramesh T. Khanchandani and held 13 per cent i.e., 3,900 shares out of 33 per cent i.e., 9,900 shares allotted to Khanchandani's group. The petitioner-Kunal initially paid an amount of Rs. 3,54,51,000 which was equivalent to 13/33 of Rs. 9,00,00,000 as its contribution by way of loans and deposit to participate in the Worli project as a nominee of the said Khanchandani group. It was mutually agreed that the payments of such interest to the participants was nothing but an advance against their final profits and was adjustable against their shares in the final profits to be distributed equally in the ratio of 34:33:33 on completion of the said Worli project. That neither the K.K. Motwani group nor the Manohar T. Makhija group took any interest at any time on the advances made by them to the Company and therefore, subsequently such periodical payments of interest earlier made to Shri Ramesh T. Khanchandani and his nominees including the petitioner were also stopped. It was contended that the Worli project could not take off because of va....
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....Director had raised any dispute of the nature raised by the petitioner-Kunal. It was contended that the petitioner-Kunal's claim for the payment of interest only to the petitioner-Kunal in preference to the depositors and lenders of other groups as also Shri Ramesh T. Khanchandani himself to whose group the Petitioner-Kunal belonged as a nominee was unjust complex and of triable nature as such interest was in any case adjustable against the final profits, if any, of the project. It was contended that when the real estate market had totally crashed, plans for construction of the Worli property not yet approved for the reasons aforesaid and the Company's claim against the Income-tax department for interest and damages etc. for the delays, not of Company's making, still to be resolved, it was neither justified nor possible for the Company to make any payment to the Petitioner-Kunal in respect of its loan/deposits in the nature of its contribution for participating in the project as also the interest in lieu of final profits in preference not only to contributors of other groups but even the proposed flat owners. It was contended that the main asset of the Company was the said plot of ....
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.... it was denied that the Company was liable to pay the amount claimed and that it was just and equitable that the Company should be wound up. That Kunal was a nominee of Shri Ramesh T. Khanchandani group and one of the participants in the said project. The amount advanced by it to the Company was agreed contribution simpliciter and not the amount allegedly lent and advanced by the petitioner as held out by it. It was denied that the petitioner was not given copies of annual accounts, directors' and auditors' reports regularly and that therefore, the petitioner was unaware about the present status of development of Worli property as alleged by the petitioner. It was contended that Kunal never made any such grievance prior to the filing of the petition. That the allegations made by the petitioner-Kunal were absurd and motivated. It was further contended that the order of winding up was not only injurious to the interests of the proposed flat owners, the shareholders and business participants but in the aforesaid circumstances, when the matter was lying for decision with the Finance Minister, it will not be beneficial and will not even be in the interest of the petitioner itself. On be....
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....or did it any way affects the liability of the Company to Kunal. It was submitted that the petitioners were allotted 3,900 shares as the petitioners could give a loan to a private limited company only if they were shareholders. It was contended that Kunal's name was not mentioned as a nominee in the alleged agreement dated 28-3-1994. It was averred that 3,900 shares were allotted to the Petitioners as they had agreed to lend monies to the Company and not as nominees of Shri Ramesh T. Khanchandani. It was denied that Rs. 3,54,51,000 were paid by the Kunal as its contribution by way of loans and deposit to participate in the Worli project as a nominee of the Khanchandani group. It was reiterated that the said amount was lent and advanced as and by way of a loan which was repayable together with interest @ 18 per cent per annum with quarterly rests. It was reiterated that the petitioner had refunded part of the loan and interest thereon at the rate of 18 per cent p.a. and that these payments were not by way of advance against any future profits as falsely alleged. That the notices to the Company went un-replied. That there was no agreement entered into by Kunal regarding distribution ....
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....999, the Appellate Bench extended the period for depositing the amount by one week. The amount was not deposited. The Division Bench, thereafter, heard the appeal and summarily dismissed the same by order dated 20-4-1999. After admission of the petition it was advertised and an affidavit proving publication of the admission was filed. 11. During the pendency of Company Petition No. 726 of 1998 in this court, a Company Petition No. 171 of 2000 was filed by Mr. Tarachand H. Khanchandani. (Hereinafter referred to as the 'Petitioner-Tarachand'). It was averred in the petition that on or about 15-4-1994, on a request made by the Appellant-Company to provide temporary financial assistance to fulfil and discharge its liabilities to acquire and purchase an immovable property being a plot at Worli on auction sale by the appropriate authority under the Income-tax Act and for meeting the consideration price of Rs. 21,75,00,000 the petitioner-Tarachand provided advances to the Appellant-Company in the sum of Rs. 4,08,99,000 by way of temporary financial assistance. The Appellant-Company had agreed to pay interest @ 18 per cent p.a. on the amount so advanced and the amount so advanced was du....
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....of the Company and particularly of its director Shri Motwani who has been in-charge of the affairs of the Company were so gross that the said Company had defrauded the various creditors of the Company. To the best knowledge of Tarachand, the Company had so far not obtained sanction of plans, secured the issue of commencement certificate and other orders/approvals from the concerned authorities and therefore, there were no chance of commencing and completing the development of the property purchased in auction from the Income-tax department. That the Company had not shown readiness and willingness to take appropriate steps for the purpose of development of the said property. The company had not given any proposal to this Court in the pending Company Petition No. 726/1998 to discharge its liability to its creditors. The petitioner-Tarachand apprehended that if the said Company succeed in obtaining a refund of the amount of auction price from the Income-tax department, such amount will be siphoned away and none of the creditors will get a return of their amount and claim towards interest or the Company may refund the said amount to its selected creditors to the prejudicial interest of....
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....een refunded to the Khanchandani group and Makhija group. In view of the fact that an amount of about Rs. 16. crores will be available for distribution, it was suggested that each party including the persons who had booked flats in the said building, accept a pro rata distribution of the said amount of Rs. 16 crores. The proposed pro rata distribution was in the handwritten notes that was annexed to the letter. On the basis of this pro rata distribution the Petitioners were to receive an amount of Rs. 1.2 crores. It was contended on behalf of the Appellant-company that the contents of the letter and the hand written notes fully confirmed the understanding that has been pleaded by the Appellant-company amongst the three groups. By further affidavit dated 17-10-2005 affirmed by Mr. Dalal on behalf of the Petitioner-Kunal, the balance sheet of the Appellant-company for the year 1994-95 till the year 2003-04 were placed on record in order to enable the court to appreciate the financial position of the company. In the affidavit dated 21-9-2005 affirmed by Mr. S.S. Dalal, it was stated that during the pendency of the petitions as offer for purchase of the flats was received by the compan....
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.... counsel submits that, however, the learned Single Judge has considered the material which has come on record, which does not necessarily support the averments in the petition in relation to just and equitable ground. In the submission of the learned counsel this is impermissible. In our opinion, however, the submission is not well founded. The Supreme Court in its judgment in the case of Hind Overseas (P.) Ltd. v. Raghunath Prasad Jhunjhunwalla AIR 1976 SC 565 in paragraph 35 has observed thus :- ". . . It is now well established that, the sixth clause, namely, 'just and equitable' is not to be read as being ejusdem generis with the preceding five clauses. While the five earlier clauses prescribe definite conditions to be fulfilled for the one or the other to be attracted in a given case, the just and equitable clause leaves the entire matter to the wide and wise judicial discretion of the court. The only limitations are the force and content of the words themselves, 'just and equitable'. . . ." (p. 575) The court in paragraph 42 has further observed that :- "42. It is not a proper principle to encourage hasty petitions of this nature without first attempting to sort out ....
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....i property, for which the company had paid an amount of Rs. 21.75 crores to the income-tax department. The admitted position is that despite expiry of 25 years, even the title to this property is not acquired by the company. In 1998, the Appellant-company itself has addressed a letter to the Finance Minister dated 10-6-1998. In that letter, it was claimed on behalf of the company that there is an ab initio difficulty in the title of the property, and therefore, it was stated "In the circumstances stated above, we are no more interested in the plot purchased by us. You are requested to personally look into the matter and direct the Income-tax authority to refund the principal amount together with interest at the very early date." 17. This letter has been placed on record by the Appellant-company itself along with the affidavit of Mr. K.K. Motwani dated 16-11-2006. There is nothing on record to show that this request made by the company for return of the property to the Income-tax Department has at any time been withdrawn by the company. It is the case of the Appellant-company itself that the amounts were advanced by the Petitioners in these two company petitions for the developme....
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....of the company is not correct without giving any explanation how income statement came to be made in the balance sheet, and still the company argued before us that it was not just and equitable to wind up the company. We find that there is substance in the submission made on behalf of the Petitioners in the company petition, that the records were fabricated by the company to show that substantial amounts were received from the flat purchasers, when no such amounts were actually received, so as to deny payment to the persons who have advanced loans to the company. Taking overall view of the matter, in our opinion, no exception can be taken to the order of the learned Single Judge directing winding up of the company on the ground that it is just and equitable to wind up the company. 18. Now, taking up the other ground on which the winding up of the Appellant-company has been ordered, namely inability of the company to pay its debts, there is no dispute between the parties that the amounts have been received from the Petitioners in both the company petitions by the Appellant-company. It is not in dispute that interest at the rate of 18 per cent p.a. was payable on those amounts.....
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....ty in the balance sheet of the company and in the letters addressed to these Petitioners was described as 'a loan'. In our opinion, therefore, it is clear that the defence put up by the company about there being an agreement between three groups is an afterthought and has rightly been discarded by the learned Single Judge. This aspect of the matter has been considered in detail by the learned Single Judge. After having heard the learned counsel for both sides at length and after having perused the record we find no reason to disagree with the findings recorded by the learned Single Judge on this aspect of the matter. It was contended before us that the Petitioners in the company petitions were given shares at the face value, because they were contributing monies for development of the property. Now, they want to keep the shares and they also want refund of their contribution. When this submission was advanced, on behalf of the Petitioners a clear statement was made before us that in case the Appellant-company pays off the debts of the Petitioners in the company petitions, they are willing to return their shares to the company or a such person as may be named by the company. Time wa....