TaxTMI 
TaxTMI 
TaxTMI 
2019 (12) TMI 15
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....tenants (tenancy rights whereof are disputed by the Official Liquidator) to vacate the premises. The Official Liquidator is also seeking other consequential directions including, inter alia, to suggest and recommend the name of a panel valuer to conduct valuation of Office Space No.8120 at Bharat Diamond Bourse and to permit the Official Liquidator to pay the professional fees of the panel valuer as per the norms fixed by this Court. 2. The Official Liquidator's Report has been filed on the basis that the ex-directors of the Company in Liquidation have colluded with the partners/directors of the alleged tenants namely M/s. Bhavik Gems ('Bhavik Gems'), J.B. Jewellery Pvt. Ltd. ('J.B. Jewellery), Riya Diamond Pvt. Ltd. ('Riya Diamond') and M/s. Meer Gems ('Meer Gems') ("the tenants"), and have obtained collusive orders/decrees to not disturb their possession by playing fraud on the Court of Small Causes at Bombay, the 15th Additional Civil Judge Court at Surat and the Small Causes Court at Surat ("the Courts"). All the decrees have been obtained from the Courts after the date of the winding up order, i.e., 19th June, 2012 and no leave under section 44....
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...., by affixing a paper seal on the existing lock, in presence of the representatives of the Kotak Mahindra Bank (secured creditor). As regards the remaining properties, the Official Liquidator was able to only take symbolic possession thereof, since the tenants in possession of their respective premises (set out in paragraphs 4(a) to (h)) refused to handover possession on the ground that they have obtained orders/decrees from the Small Causes Courts restraining the Company from disturbing their possession. 6. The details of the decrees passed by the Courts are briefly set out as under: a. Order dated 2nd September, 2013, passed by the Court of Small Causes at Mumbai in R.A.D. Suit No.1417 of 2011 in the case of Bhavik Gems v. J.B. Diamonds Limited, in respect of Office Premises at 6B Unity House, 3rd floor, Prasad Chambers, Opera House, Mumbai-400 004; b. Order dated 25th January, 2016, passed by the Court of Small Causes at Mumbai in R.A.D. Suit No.1343 of 2011 in the case of Bhavik Gems v. J.B. Diamonds Limited, in respect of Office Premises at Unit No.406, 4th floor, Prasad Chambers, Opera House, Mumbai-400 004; c. Order dated 2nd September, 2013, passed by the Court of Sm....
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....f approximately 50 sq. ft. of the Office Premises at Unit No. 405, 4th floor, Prasad Chambers, Tata Road No.1, Swadeshi Mills Compound, Opera House, Mumbai-400 004, was taken on 24th July, 2012 and remaining 193 sq. ft. was merged into Unit No. 406 at Prasad Chambers, Opera House. 8. The tenants on 23rd June, 2018, refused to handover possession of the properties belonging to the Company (In Liquidation), and accordingly, the Official Liquidator took symbolic possession of the following properties belonging to the Company (In Liquidation) situated at Surat: a. FP No. 12, Patel Nagar, Ashwanikumar Road, TP Scheme No.4, Surat, which was in possession of Riya Diamonds; b. Factory Building, 248-249, Lambe Hanuman Road, Near Railway Station, RS No. 46/A/2 Paikee TP Scheme No.4, FP Nos.249-A & 248, Surat City, Ward, Navagam, Surat, which was also found to be in possession of Riya Diamonds; c. Factory Building, 248-249, Lambe Hanuman Road, Near Railway Station, RS No. 46/A/2 Paikee TP Scheme No.4, FP No.249-A & 248, Surat City, Ward, Navagam, Surat, which was in possession of Bhavik Gems; d. Factory Building, Plot Nos.147 to 151, Pandoi Industrial Estatem Ved Road, Surat. RS No. ....
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....tor of Riya Diamonds and Mr. Miral V. Surani, Partner of Meer Gems and also their respective undertakings to the effect that they shall not transfer their tenancy rights in favour of any party until further orders of this Court. 13. By Orders dated 19th December, 2018 and 21st December, 2018, the tenants had also given an undertaking to produce (i) income tax returns from the year which they claim to be a tenant in respect of the premises, (ii) all statutory records where address of the premises is shown, of which they allegedly claim to be in possession and (iii) the rent receipts issued by the said Company to the tenants in respect of the premises. 14. Accordingly, the tenants have filed their respective affidavits producing certain records. The record placed before me by the Official Liquidator and the tenants reveal that: a. The ex-directors of the Company, save and except for Mr. Jivrajbhai Surani, are the Directors of J.B. Jewellery Pvt. Ltd., who allegedly claim to be a tenant of office premises at 418, 4th Floor, Prasad Chamber, Opera House, Mumbai - 400 004; b. The ex-directors of the Company namely Mr. Sureshbhai Kukadiya, Mr. Rajeshbhai Surani, and Mr. Virjibhai Ku....
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....nce on behalf of the tenants and on the other hand, the Company chose not to raise any substantial defence/lead any evidence/produce any documents to controvert the case of the tenants. This is evident from a bare perusal of the Orders dated 2nd September, 2013, and 25th January, 2016 passed by the Court of Small Causes at Mumbai. 17. Before the Courts at Surat, the right of the Company (In Liquidation) to file a reply were closed by the Courts. In fact on 2nd September, 2012, when an application for interim reliefs filed on behalf of one of the tenant, was kept for hearing, before the Court of Small Causes at Surat, none appeared on behalf of the Company and the Small Causes Court at Surat, was compelled to proceed ex parte against the Company and the application for interim reliefs filed by tenant was allowed. 18. It is in these circumstances, the Official Liquidator filed the present report before this Court on 1st February, 2019. Before dealing with the arguments canvassed before me, I shall first refer to and deal with the Affidavits dated 12th February, 2019, filed by the tenants pursuant to the Orders dated 19th December, 2018 and 21st December, 2018, passed by this Court:....
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....s not produced any rent receipts for Office Premises at 6B, Unit House, Opera House and/or for the factory premises at Surat. In paragraph 13 of the Affidavit, a statement has been made that a sum of Rs. 6,00,000/- and Rs. 4,00,000/- has been paid by Bhavik Gems to the Company in advance for use of the factory premises at Surat for 30 years. However, no proof of payment has been produced by Bhavik Gems before this Court. d. Bhavik Gems has produced IT Returns from AYs. 1995-96 till 2010-11 which reflects the address of Office Premises at 405. Apart from producing some certificates of registration and professional tax receipts issued by the Surat Municipal Corporation, Bhavik Gems has also produced a registration certificate dated 23rd June 2005 of establishment issued by Surat Municipal Corporation, which registration certificate bears a different address altogether. J.B. Jewellery: e. J.B. Jewellery has filed an Affidavit of Mr. Bhagwanbhai Kukadia dated 12th February, 2019. All the ex-directors of the Company in liquidation except Mr. Virjibhai Kukadiya are the directors of J.B. Jewellery. J.B. Jewellery claims to be a tenant of office premises at 418, Prasad Chambers....
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....he case of Riya Diamond. The Affidavit discloses that Riya Diamond was carrying on its business from the premises since the year 2007. This is because Riya Diamond has produced income tax returns for AYs. 2008-09, 2009-10, 2010-11, 2011-12, 2012-13, 2013-14, 2014-15, 2015-16, 2016-17, 2017-18. Apart from not having produced the Income Tax Returns for AY- 2007-2008; it is Riya Diamond's own case in the Affidavit that the agreement dated 1st April, 2010, was valid till 13th August, 2014. This then raises the serious doubt or question as to on what basis did Riya Diamond show this address in its Income Tax Returns of 2015-16, 2016-17, 2017-18. This question remains unanswered/unexplained. Even otherwise, Riya Diamond has not produced any rent receipts. k. In view of the above, no other statutory document such as the certificate of registration dated 26th February, 2007, issued under GVAT 2003; license dated 1st January, 2008 issued by Directorate Industrial Safety and Health, Gujarat; professional tax receipts dated 12th October, 2010, issued by Gujarat Municipal Corporation, would assist the case of Riya Diamond. Meer Gems: l. Meer Gems has filed an Affidavit of Mr. M....
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....d Company (supra) in paragraphs 26(d) and 26(f) has held as under: "(d) The Consent Decree in question, which has been procured by fraud can be set aside at any stage including in an application for leave to execute it or in an Official Liquidator's Report challenging it...." "(f) In fact the judgment of the Division Bench of this Hon'ble Court in The Official Liquidator, High Court Bombay and the Liquidator of Kamani Brothers Private Limited (In Liquidation) v. Suryakant Natvarlal Surati relied upon by applicant itself is authority for the proposition that the Company Court may set aside or refuse to enforce a Decree....." c. The judgment of Forbes and Company (supra) has been confirmed by the Division Bench of this Court vide its judgement in Forbes & Company Ltd. v. Board For Industrial And Financial Reconstruction (B.I.F.R) . The Division Bench of this Court in paragraph 12 of the judgment has held as under: "12. We have given careful consideration to the submissions. We have also perused the impugned order and the material on record. On analysis of the material on record as well as the legal position, which according to us has been correctly a....
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....by a Court having no jurisdiction over the subject matter, is a nullity. i. The above position in law is supported by the judgment of the Supreme Court of India in the case of Chief Engineer, Hydel Project v. Ravinder Nath [2008] 2 SCC 350. The Supreme Court in Hydel Project (supra) had relied upon its judgment in Harshad Chiman Lal Modi v. DLF Universal Ltd. [2005] 7 SCC 791, more particularly paragraph 30 thereof, in which the question of jurisdiction was being decided by the Supreme Court and whilst deciding the same, the Supreme Court in Harshad Modi (supra) held as under: "30. We are unable to uphold the contention. The jurisdiction of a court may be classified into several categories. The important categories are (i) territorial or local jurisdiction; (ii) pecuniary jurisdiction; and (iii) jurisdiction over the subject-matter. So far as territorial and pecuniary jurisdictions are concerned, objection to such jurisdiction has to be taken at the earliest opportunity and in any case at or before settlement of issues. The law is well settled on the point that if such objection is not taken at the earliest, it cannot be allowed to be taken at a subsequent stage. Jurisdic....
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....the judgments into effect", "the power to enquire into the facts, to apply the law, to pronounce the judgment and to carry it into execution", Reference may in this connection be made to the discussion of the nature of jurisdiction in the judgments of this Court in Ashutosh Sikdar v. Behari Lal MANU/WB/0158/1907 : 11 CW.N. 1011 : 6 CL.J. 320 : 35 C 61 (F.B.) and Gurdeo Singh v. Chandrika Singh 1 Ind. Cas. 913 : 36 C 193 : 5 CL.J. 611. This jurisdiction of the Court may be qualified or restricted by a variety of circumstances. Thus, the jurisdiction may have to be considered with reference to place, value, and nature of the subject matter. The power of a tribunal maybe exercised within defined territorial-limits. Its cognizance maybe restricted to subject-matters of prescribed value. It maybe competent to deal with controversies of a specified character, for instance, testamentary or matrimonial causes, acquisition of lands for public purposes, Record of Rights as between landlords and tenants. This classification into territorial jurisdiction, pecuniary jurisdiction and jurisdiction of the subjectmatter is obviously of a fundamental character. Given such jurisdiction, we mustbe car....
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.... event the purported tenants would have applied for leave under Section 446 of the Companies Act, 1956, this Court would have had the opportunity to examine the reason for seeking such a leave to prosecute suits against the Company (in liquidation) and this Court would have dealt with the collusion and fraud, which are writ large, and would have directed the proceedings to be heard before it. Intentionally, the ex-directors of the company (in liquidation) did not file/apply for any leave under Section 446 and are at this stage attempting to obstruct the Official Liquidator from taking custody of the properties of the company. p. This Court cannot lose sight of the fact that the decrees which have been obtained by the purported tenants are in fact for the benefit and advantage of the ex-directors of the Company (in liquidation). 20. During the course of oral submissions, the Official Liquidator made a disclosure that a letter dated 14th October, 2013, was received by the office of the Official Liquidator from the tenants, wherein references were made to the pending suits filed by them against the Company in liquidation. However, due to sheer inadvertence, there was no response fr....
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....della Woollens Ltd. v. Official Liquidator [2007] 79 SCL 172, and more particularly paragraph 36 thereof, which reads as under: "36. In the light of the clear principle of law laid down in this decision we are of the view that the Company Court had no jurisdiction to declare, in the present case, that the decree passed by the Court of Small Causes was null, void and not binding on the applicant. Admittedly, the applicant had not instituted any proceedings against the company (in Liquidation). It had also no claim against the applicant which could be continued against the Official Liquidator. Nor was a prayer made to transfer any pending proceeding by or against the company (in liquidation). Additionally, as noted above, it is the applicant which has approached the Company Court. It has claimed reliefs principally against the appellant before us which is not a company (in liquidation). Ultimately, the declaration as claimed affects the appellant before us. As to how at the instance of the applicant the Company Court could have nullified the decree passed in favour of the appellant before us in its limited jurisdiction, is not clear to us at all. Impleading the company (in li....
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....as paid in respect of the subject premises and that there was a subsisting license and (ii) by virtue of Section 15 of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, the Small Causes Court had no jurisdiction and competence and therefore the decree was in nullity not binding upon the Applicant. It is in the aforesaid circumstances, the powers of the Company Court under Sections 446 and 536(2) of the Companies Act, 1956, were invoked to seek a declaration that the second respondent was a trespasser and that the decree is vitiated by fraud and therefore a nullity. It is in the facts of that case, the Division Bench of this Court in Modella Woollens (supra) held that the Company Court had no jurisdiction to take cognisance of the company application and pass any orders/directions in favour of the Applicant before it. 24. Mr. Jagtiani submitted that the judgment of Indian Bank v. Official Liquidator, Chemmeens Exports (P) Ltd. [1998] 5 SCC 401, referred to in Modella Woollens (supra), also would not assist the case of the tenants since Indian Bank (supra) was a case where leave had already been granted under Section 446 of the Companies Act to a creditor to prosec....
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.... Kukadia led evidence on behalf of the tenants before the Small Causes Court at Mumbai in the Suits filed by the tenants against the Company (in liquidation). It is relevant to refer to the observations made by the Small Causes Court at Mumbai in its judgment and order dated 2nd September, 2013, in R.A.D. Suit No.1417 of 2011, in the case of Bhavik Gems v. J.B. Diamonds: ":REASONS: 5. The plaintiff has lead oral as well as documentary evidence in support of its contention. The plaintiff has examined P.W.1 Mr. Suresh Kukadia, its Director at Exh.21 and produced various documents viz. resolutions at Exh.23 and Exh.24, rent receipts at Exh.25 to Exh.34, letter dated 26/8/2011 at Exh.35, complaint to police at Exh.36 in support of its contention. As against, the defendant has not lead any oral as well as documentary evidence in support of its contention. Heard argument advanced by the learned counsel for plaintiff to this suit. The oral as well as documentary evidence produced by the plaintiff on record of this suit is discussed hereinafter issue-wise. 6. ** &....
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....cree, "passed by the first court or the highest court', has to be treated as a nullity "by every court, whether superior or inferior". Such judgments/decrees can be challenged in any court even in collateral proceedings. This position of law has been reiterated by this Court in Forbes and Company (supra). 31. Mr. Jagtiani for the Official Liquidator has contended that the orders/decrees passed by the Courts in favour of the tenants having been procured by fraud, ought not to be enforced or taken cognizance of, even as a defence to the Official Liquidator's Report by this Court and this Court must declare the orders/decrees as illegal and void. On the other hand, the Advocate for the tenants has not dealt with or even responded to the submissions made on behalf of the Official Liquidator in respect of the collusion and the fraud committed by the ex-directors of the Company and the tenants. The only submission which has been canvassed on behalf of the tenants is that the Division Bench of this Court in Modella Woollens (supra) has held that the Company Court has no jurisdiction to declare a decree passed by the Small Causes Court as null, void and not binding. 32. The judgm....
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....uidator was bound in law to take possession thereof The third assumption on the part of the learned Judge is that the Court of Small Causes passed a decree in a collusive suit inasmuch as without any evidence of relationship of licensor and licensee and any threat of eviction a declaration of deemed tenancy came to be issued by it. This declaration could not have been issued since requirements stipulated by Section 15A of the Bombay Rent Act namely subsistence of licence and payment of licence fee or charge as on the relevant date have not been satisfied in the present case. 33. It is pertinent to note that company application has not been instituted by the Official Liquidator. He does not claim any declaration of the nature claimed by the applicant much less any direction that the property be delivered to him. At the instance of the applicant who has a distinct right, title and interest in the premises based upon its character as public premises, it is extremely doubtful as to whether the learned Judge could have passed any orders on the company application. More so, when there is a further doubt as to whether the relationship of licensor and licensee which is claimed by the com....
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....ied from an order passed by this very Court. The Hon'ble Supreme Court after noticing rival contentions has observed that:- a. The tenancy rights the company had in the said flat may not be an asset for the purpose of liquidation proceedings, and b. merely because a company goes in liquidation and a liquidator/official liquidator is appointed, the rights of the company vis-a-vis its landlord and/or its tenants do not undergo any change." [Emphasis Supplied] 33. I am also in agreement with the submission made by Mr. Jagtiani that the judgment of Indian Bank (supra), referred to in Modella Woollens (supra), also would not assist the case of the tenants since Indian Bank (supra) was a case where leave had already been granted under Section 446 of the Companies Act to a creditor to prosecute the suit, in which Official Liquidator had been joined. 34. It was urged by Mr. Jagtiani that the Courts at the time of passing the orders/decrees did not have the requisite jurisdiction over the Company (in liquidation) due to the limitation imposed under Section 446 of the Companies Act, 1956, and hence, the orders/decrees passed by the Courts being without jurisdiction is coram non jud....
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....liquidation, under Section 446(2) of the Companies Act, this Court would have considered hearing the suits in order to advance the object of Section 446 of Companies Act. 38. Since I have already come to the conclusion that the orders/decrees obtained by the tenants from the Courts are collusive and fraudulent and without jurisdiction as no leave under Section 446 of the Companies Act was obtained, no post-facto leave under Section 446 of the Companies Act can otherwise validate the collusive orders/decrees obtained by the tenants and/or save them from being declared as illegal and void. The admitted fact that the ex-director of the Company in liquidation had led evidence on behalf of the alleged tenants before the various Courts and that the ex-directors of the Company in liquidation were fully aware about the winding up order dated 19th June, 2012, passed by this Court, cannot be ignored. This in fact goes to the very root of the submission of the Official Liquidator viz. collusion and fraud. 39. Even in respect of the letter dated 14th October, 2013, produced by the Official Liquidator before me, I am of the view that the same will neither dilute the collusion and fraud commit....
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....Court for the purpose of clarification of the order passed in the case of Harshad Govardhan Sondagar (supra). Taking into consideration the fact that Petitioners are the Directors, guarantors and also signatory to the loan documents, we are not inclined to continue the interim order. Hence, request for continuation of interim relief is declined. " 41. Being aggrieved by the Order dated 8th April, 2015, the tenants and the ex-directors of the Company preferred Special Leave Petition Nos. 11758/2015, 11761/2015, 11764/2015 and 11762/2015 before the Supreme Court of India, which petitions came to be dismissed by the Apex Court vide its Order dated 24th April, 2015, in view thereof, the Order dated 8th April, 2015, passed by the Division Bench of this Court, having attained finality, it can be hardly contended by the alleged tenants that they are protected tenants in law. Even otherwise, the alleged tenants have failed to make out any case which would warrant this Court to direct the Official Liquidator not to take physical possession of the assets of the said Company. 42. It may not be out of place to mention that the modus operandi of the ex-directors as seen above has become a reg....