TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 895
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....0.09.2004 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 Hoffland Finance Ltd.) was initially subscriber to the ....
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.... 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 which were allotted without any cash coming to the company Goga ....
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.... 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 that even if this court were to believe the statement of Mr. B.B. Sharma then the claim ....
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....and 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 absence of any positive proof it is pleaded that the said persons have no case against the land belonging to Goga Foods Limited. 1....
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....r 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 any person on his behalf, or any person claiming as assignee from or through the person liable or any person acting on his behalf. (c) The court may, from time to time, make such furthe....
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...., 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 conduct needs to be established from the beginning to the end to invoke Section 542 of the Act. That is because it would be reasonable to assume, that directors/managers who are shown to have indulged in even a single act of fraud ....
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....powers 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-contract, some fiduciary relation or a failure to perform a duty, there is no abatement of the liability on the death of the wrong-doer. When once the liability is declared it is open to the Official Liquidator to realise the amount due by resort....
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....n, 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 gross profit of Rs. 14,520.80/-. Similarly for the next Financial year, namely, 1993-94 an income again through commission and interest is shown as Rs. 5,84,832.29/- and the gross profit is shown as Rs. 50,004.48/-. It is manifest that the said Goga Foods Limited at that t....
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....cant 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/- was transferred to the accounts of Goga Foods Ltd. for the said purpose. [V] 30. Another imporant aspect in this case is the manner in which the applicants have refused to divulge details and information to this court. It has been claimed by the applicants that in 2003 the new management....
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....ns, 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 Hoffland Finance Ltd. Copy of this order shall be served by this committee upon the concerned police station(s) the revenue authorities and the registrar(s) of documents. It is made clear however that the running of the factory by M/s Goga Food Ltd. has not been prohibited in any manner. Interim orders passed earlier by ....
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.... 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 affidavit. The intention of the applicant, in the above circumstances, appears to be not bona fide. It seems to be a ploy to delay the proceedings. I, therefore, agree with the contention of the learned counsel for the committee that taking the affidavit on record and directing the crossexamination of the deponent would be nothing but a waste of time. Nothin....
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....marised 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 to be considered in the background of facts involved in the case. Existence of some other circumstances may justify nonproduction of such documents on some reasonable grounds. In case one party has asked the court to direct the other side to produce the document and the other side failed to comply with the court's order, the court may be justified in drawing the adverse inference. All the pros....