TaxTMI 
TaxTMI 
2019 (10) TMI 895
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....e Provisional Liquidator. 2. This court on 10.09.2004 under section 457(v) noted that the office of the OL would not be fully equipped to expeditiously undertake the enormous task required to complete the winding up process of the Hoffland Group of Companies. The court appointed a Committee. 3. Both these applications are filed by Goga Foods Limited. CA 652/2007 is filed by the said Goga Foods Limited seeking a direction that the said applicant company is not a part of the Hoffland Group of Companies and, therefore, be deleted from the list of companies being treated as part of Hoffland Group of Companies. Direction is also sought that no action be taken against the land, building and properties of the applicant company. CA 1445/2013 is also filed by Goga Foods Limited for a direction to frame issues and allow the parties to lead evidence on the question involved i.e. whether Goga Goods Ltd. can be treated as part of the Hoffland Group of Companies/whether its assets were bought out of funds belonging to Hoffland Finance Ltd. 4. The case of the applicant is that it was incorporated in the year 199192 under the Companies Act, 1956. Shri B.B.Sharma (also the promoter of Hoff....
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....g about 30 and that 90% of the funds required for business of all these companies came from public deposits received in Hoffland Finance Limited. He further pleaded that not only was the office, furniture, telephone common of the Hoffland Group including the applicant Goga Foods Limited, the staff was also common. The same staff members used to work for the Hoffland Group and for Goga Foods Limited. Goga Foods Limited had no independent business or independent income. All properties in Khekra Village were purchased through Mr.B.B.Sharma in the name of Goga Foods Limited with the amount of public deposits received by Hoffland Finance Limited. For this purpose, funds were routed through Hoffland Engineers to Goga Foods Limited. Further it is stated that the land of the two companies, namely, Hoffland Engineers Limited and Goga Foods Limited is contiguous and interspersed to such an extent that there are many khasra Nos. purchased in the name of Hoffland Engineers Limited and some portion of the same land has been purchased in the name of Goga Foods Limited. No demarcation has been done in such cases. It is stated that shares amounting to Rs. 1.65 crores of Goga Foods Ltd. most of whi....
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....ows:- (i) It has been strenuously pleaded that no evidence has been led by the Official Liquidator or the Committee to show that any money belonging to the Hoffland Group was used by Goga Foods Limited. No books of accounts of Hoffland Finance Limited have been produced to show transfer of funds. It is pleaded that the OL claims the land for the respondent Company, so the onus is on it to prove its contentions. (ii) It has further been pleaded that the sale deeds of the property in question are in favour of Goga Foods Limited. The property is in possession of Goga Foods Limited. The cash receipts in the name of Goga Foods Limited are available with the applicants. A total consideration of Rs. 9 to 10 lacs was paid and about 100 sale deeds were executed in 1992-95. In these facts the title of Goga Foods Limited to the said land cannot be disputed. (iii) It is further stated that merely because Mr. B.B. Sharma has before the Court Appointed Committee made some statements claiming that funds were transferred to Goga Foods Limited from Hoffland Finance Limited would not suffice to divest the applicant of the title to the land in question. It is further stated....
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....arned counsel appearing for the Court Appointed Committee has pointed out that the said factory of Goga Foods Limited has land measuring 22,623 sq.meters out of which 5257 sq.meters is in the name of Hoffland Engineers Limited. This is also confirmed by the Valuer appointed by this Court "ITCOT Consultancy and Services Ltd.". Clearly, the land has been purchased by a Single entity, namely, the Hoffland Group. It is further pleaded that the present Directors of Goga Foods Limited are not known, no details have been filed. Reliance is placed on section 542 and 543 of the Companies Act, 1956 to submit that the company court would have powers to take over the assets of the respondent company Hoffland Finance Limited which includes the land claimed by Goga Foods Limited. 14. Mr.Ravinder Sethi, learned senior counsel appearing for Goga Foods Limited has reiterated that the sale deed of the properties of Goga Foods Limited, the receipts are all in the name of Goga Foods Limited, possession of the land is with Goga Foods Limited. The factory was built by Goga Foods Limited. It is pleaded that these facts are sufficient to throw the onus on the OL/Committee/Mr.B.B.Sharma. In the ab....
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....ied on, with intent to defraud creditors of the company or any other persons or for any fraudulent purpose, the court on the application of the Official Liquidator, or the liquidator or any creditor or contributory of the company, may, if it thinks it proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in the manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct. On the hearing of an application under this sub-section, the Official Liquidator or the liquidator, as the case may be, may himself give evidence or call witnesses. (2) (a) Where the court makes any such declaration, it may give such further directions as it thinks proper for the purpose of giving effect to that declaration. (b) In particular, the court may make provision for making the liability of any such person under the declaration a charge on any debt or obligation due from the company to him, or on any mortgage or charge or any interest in any mortgage or charge on any assets of the company held by or vested in him, or ....
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.... its very nature, fraud is not easy to establish. This is even more so, when the fraudulent conduct is undertaken by the Directors of a company, sitting in their own office, with a view to defraud the creditors/investors who, though the victim of the fraud, are not involved in the transactions which constitute such conduct, and may have no personal knowledge of the same. In K.T. Dharanendrah v. R.T. Authority AIR 1987 SC 1321 the Supreme Court, while dealing with a case under the Customs Act, 1962 observed that "An economic offence is committed with cool calculation and deliberate design with an eye on personal profit regardless of the consequence to the Community. A disregard for the interest of the Community can be manifested only at the cost of forfeiting the trust and faith of the Community in the system to administer justice in an even handed manner without fear of criticism from the quarters which view white collar crimes with a permissive eye unmindful of the damage done to the National Economy and National Interest." 11. I also find merit in the submission of Mr. Shakdher that it is not necessary that each transaction/instance of funds being siphoned or fraudulent ....
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....h the instrumentality of a corporate entity with limited liability, and then mock at their shareholders and creditors and the Courts, and seek to protect themselves behind the veil of the Corporate Entity. The law is not toothless, but empowers the Courts with authority to deal with such situations." 18. The Supreme Court in Official Liquidator vs. Parthasarathi Sinha and Others, (1983) 1 SCC 538 held as follows:- "18. The liability arising under the misfeasance proceedings is founded on the principle that a person who has caused loss to the company by an act amounting to breach of trust should make good of the loss. Section 543 of the Act does not really create any new liability. It only provides for a summary remedy for determining the amount payable by such person on proof of the necessary ingredients. The section authorises the court to direct such persons chargeable under it to pay a sum of money to the company by way of compensation. This is not a provision intended to punish a man who has been found guilty of misfeasance but for compensating the company in respect of the loss occasioned by his misfeasance. Whenever there is a relationship based on contract, quasi....
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....ds were the deposits of the depositors of Hoffland Finance Ltd. 23. No doubt, the applicants do not accept these statements and state that these are mere self-serving statements which do not have any evidentiary value. However, given these allegations, in my opinion, it was for the applicants to have placed on record appropriate documents and records to show that the properties in question have been bought from the internal resources of the Company. This would be the best evidence to rebut the contentions of the OL and others and to settle the matter in favour of the applicant. The applicants have however failed to do the needful. [II] 24. Another important fact is that the applicants have placed on record some balance sheets. The applicants have placed on record the balance sheets of Goga Foods Limited for the year 1991-92 till 1993-94 i.e. the period when most of the land in question was bought. A reading of the balance sheet reveals interesting facts. The balance sheet for the year 199192 shows a loss of Rs. 97,088.70/-. There is no income shown. For the year 1992-93 the Profit and Loss Account shows an income through commission and interest of Rs. 4,42,555.11/- and a g....
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....he name of Goga Food Ltd. is also scattered outside the factory premises. Admittedly, the applicant has not laid any claim on this land situated outside the factory premises. In fact, on 18.11.2010, a statement was made on instructions by the learned senior counsel for the applicant that they have no objection if the land situated outside the factory but in the name of Goga Foods Ltd. is sold and proceeds are used to pay the depositors of Hoffland Finance Ltd. It is manifest that the applicant have shown no interest in the land purchased in the name of the applicant Goga Foods Ltd. which is located outside the factory premises since the last 25 years. 28. The manner of purchase of the land clearly demonstrates that one entity, namely, the Hoffland Group purchased the same. [IV] 29. I may also mention that the OL has relied upon the statement of the Economic Offences Wing to show that the funds have also been transferred to Goga Foods Ltd. Relinace has been placed on a communication receivd by the court from the Deputy Commissioner, Economic Offences Wing which states that the property of Goga Foods Ltd. is a part of the Hoffland Group and that a sum of Rs. 5,20,000/- wa....
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.... explanation of the manner and mode in which the sale consideration(s) have been effected or paid by the applicant to the erstwhile owners of the property which are the subject matter of the sale deeds enclosed with the application. 2. The applicants shall also give complete details of the transactions, instruments of transfer, payment of monetary consideration including particulars of cheque numbers with regard to any other land over which M/s Goga Foods Ltd. is claiming the ownership, but the committee alleges as having been the purchased out of the fund of Hoffland Finance Ltd. Copy of all the bank accounts, statement of account of the bank, details of bank instruments in respect of these transactions and duly audited account(s) in this behalf shall be placed on record. The applicant shall also placed on record all relevant revenue records in this behalf. 3. Having regard to the nature of the claims made by the applicant as well as on behalf of the applicant company, it is directed that all parties shall maintain status quo with regard to title, possession and construction on all land(s) which are alleged to have been purchased out of funds of M/s Hoff....
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....owever, the balance sheet by itself cannot throw any light on the source of acquisition of the lands. By filing documents which are not relevant and which cannot throw light as to the source of funds, GFL cannot be permitted to delay the proceedings further. It is a matter of grave concern that for a period of almost five years GFL chose not to act and comply with the directions of this Court vide order dated 05.09.2008. Though this order was passed in its presence, GFL failed to bring to the notice of the Court that its old records had been allegedly stolen in April, 2008. It is difficult to believe that the omission to mention this to the Court was an inadvertence or oversight. This fact was brought to the notice of the Court for the first time on 21.05.2013 and that did annoy this Court considerably. There is no explanation why the bank statements, statement of account with the bank, bank instruments, etc. could not be obtained from the banks even if it is true that old records were stolen. Now the applicant has come forward to file the affidavit, after a period of almost five years from 05.09.2008, and that too without the documents that were directed to be filed along with the....
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.... [AIR 1964 SC 136], Union of India v. Mahadeolal Prabhu Dayal [AIR 1965 SC 1755], Gopal Krishnaji Ketkar v. Mohd. Haji Latif [AIR 1968 SC 1413], BHEL v. State of U.P. [(2003) 6 SCC 528], Mussauddin Ahmed v. State of Assam [(2009) 14 SCC 541] and Khatri Hotels (P) Ltd. v. Union of India [(2011) 9 SCC 126].] xxxx 24. Thus, in view of the above, the law on the issue can be summarised to the effect that the issue of drawing adverse inference is required to be decided by the court taking into consideration the pleadings of the parties and by deciding whether any document/evidence, withheld, has any relevance at all or omission of its production would directly establish the case of the other side. The court cannot lose sight of the fact that burden of proof is on the party which makes a factual averment. The court has to consider further as to whether the other side could file interrogatories or apply for inspection and production of the documents, etc. as is required under Order 11 CPC. Conduct and diligence of the other party is also of paramount importance. Presumption of adverse inference for non-production of evidence is always optional and a relevant factor ....
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....said contention. 38. Another plea has been raised by Ld. Sr. Counsel for the applicant is that if the contentions of the OL are accepted then the land in question would fall within the parameters of a benami property. This plea was not elaborated in the course of the arguments. Even otherwise the nature of transactions in issue is such that the provisions of the Benami Transactions (Prohibition) Act, 1988 would not be attracted. 39. In view of the above, in my opinion there is no merit in the present applications. The same are dismissed. OL is free to take steps regarding the property as per law. ============= Document 1 ZE 22' 577 tertios गोगाठफूडस लिमिटेड : 2408 2616 2312 2.622 2538 Laning ete, (33303 2422 ãˆè€ƒãˆã‚‹ 2.820 2415 2842 243 26.20 12204 2402 2407 2424 2424 242 ૨૬૪૬ 24, 248335 २६६८ 28.26 2602 2.578 2608 2602 جا 6. 1250 (2604 3.463 2620. 12 2636 250 2612 1 11 26-7 265. (à¥....