TaxTMI 
TaxTMI 
2023 (6) TMI 1452
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.... M/s. Maneklal Enterprises Pvt. Ltd ("M/s. Maneklal") - defendant No.4, with Bank of Baroda, Mumbai. 2. For the sake of convenience and clarity, the parties are hereinafter referred to in the capacity in which they are arrayed before the City Civil Court in Suit No.4321 of 2013. 3. Corporate and family disputes are intertwined. It is, therefore, necessary to note the background facts in which the appeal arises, in a little detail. (a) Late Yogesh Maneklal was the husband of defendant No.1. The plaintiff and defendant No.2 are their sons. After the demise of Mr. Yogesh Maneklal, on 16th March, 2010, disputes arose as different Wills of the deceased Yogesh were propounded by plaintiff and defendant No.1. Defendant No.4 M/s. Maneklal is a private limited Company. Manek Mahal situated at Veer Nariman Road, Church Gate, Mumbai, is the asset of defendant No.4 M/s. Maneklal. (b) In the wake of dispute between the plaintiff and defendant Nos.1 and 2, the plaintiff alleges, defendant No.1, in a meeting held on 22nd November, 2013, without requisite coram, removed the plaintiff and defendant No.3, who came to be subsequently deleted, from the post of the Directors of ....
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.... learned Single Judge in Appeal from Order No.1375 of 2013 dated 20th December, 2013 restraining the defendants from altering the fixed deposits/investments, permitted defendant No.1 to seek clarification of the said order. (h) Thereupon an application seeking clarification, being Civil Application No.278 of 2017, was filed by defendant No.1. The learned Single Judge disposed of the application expressing the view that no case was made out for any clarification of the order dated 20th December, 2013, based on subsequent events. Eventually the Appeal Bench, with the consent of the parties, set aside the order dated 24th March, 2017 and remitted the matter back to the learned Single Judge for deciding the Notice of Motion No.1551 of 2016 afresh. (i) By a judgment dated 18th/19th April, 2018 in Notice of Motion (L) No.608 of 2018 in Suit No.2546 of 2012, the learned Single Judge noted that when the order dated 24th March, 2017 was passed permitting defendant No.4 Company to liquidate the investment, the order dated 20th December, 2013 was not shown to the learned Judge. After considering the material tendered on behalf of the parties and the submissions canvassed, th....
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....dered by the High Court in Appeal from Order No.1375 of 2013 by order dated 20th December, 2013, as, according to the learned Judge, it would amount to modification of the order passed by this Court as an Appellate Court. (m) Defendant No.1 came in appeal, in Appeal from Order No.735 of 2019. By an order dated 18th September, 2019, with the consent of the parties, the appeal came to be disposed by remitting the Notice of Motion to the City Civil Court for afresh hearing on its own merits without being influenced by any of the orders passed by this Court till then. It was specifically clarified that none of the orders passed by this Court till then in the litigation between the parties would come in the way of the City Civil Court entertaining and hearing the Notice of Motion. It was further provided that the order dated 20th December, 2013 passed in Appeal from Order No.1375 of 2013 did not in any way restrict the Civil Court's jurisdiction or power to decide Notice of Motion No.1182 of 2019 on its own merits. (n) In the meanwhile, National Company Law Tribunal ("NCLT") on an application of the petitioners in Company Petition, namely M/s. Suyash Traders, being app....
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.... were not entitled to touch the investments of defendant No.4 Company in the face of the restraint order. (q) After appraisal of the rival contentions and submissions canvassed across the bar the learned Judge, City Civil Court, was persuaded to allow the Notice of Motion, subject to certain conditions, primarily with a view to save the assets of the company from coercive action which MCGM would initiate upon default in payment of the property taxes. The learned Judge thus directed that the amount of statutory dues be paid out of fixed deposit held by defendant No.4 Company by demand draft/pay order/cheque and direct the defendant to deposit any amount which would be collected inclusive of rent/property tax/ repair cess in the escrow account/new account opened as per the directions of the NCLT. 4. Being aggrieved the plaintiff is now in appeal. 5. I have heard Mr. Naik, the learned Senior Advocate for the appellant and Mr. Bhole, the learned Counsel for respondent No.1 - defendant No.1, at some length. The learned Counsel took the Court through the relevant pleadings and the various orders referred to above. 6. Mr. Naik, the learned Senior Advocate for the Appella....
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....prevent defendant Nos.1 and 2 from conducting the business. In any event, the order passed by this Court in Appeal from Order No.735 of 2019 dated 18th September, 2019 (S.C. Gupte, J.) unshackled the City Civil Court of the burden of the previous orders. 10. Mr. Bhole laid emphasis on the fact that with the consent of the parties the Notice of Motion was remitted to the City Civil Court for decision afresh without being influenced by the orders passed by this Court, especially clarifying that the order dated 20th December, 2013 did not, in any way, restrict the City Civil Court's jurisdiction to decide the said Notice of Motion on its own merits. 11. Mr. Bhole would urge that the learned Judge, City Civil Court has, therefore, rightly exercised the discretion to permit the liquidation of the fixed deposit so as to save the asset of defendant No.4 Company from coercive action, which the default in payment would otherwise entail. Such a discretionary order, does not warrant any interference in exercise of the Appellate Jurisdiction, as the learned Judge, City Civil Court, has imposed conditions which, on the one hand, incorporate a fail-safe mechanism and, on the other hand, pr....
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....imary income is rent, charges and cess, ought to have deposited the municipal taxes and cess, as and when they fell due, on priority, and by giving precedence over other expenses. That would have been a measure of prudent business management. 16. Had the aforesaid been the only premise, on the touchstone of which the prayers in the Notice of Motion were to be decided, different considerations would have come into play. The Court may have then considered should the assets of defendant No.4 be put at risk for imprudent management? However, there is a significant intervention by NCLT. 17. The order passed by NCLT on 17th May, 2018 in the wake of the situation, which arose on account of accumulation of arrears of property taxes, cast obligations on defendant Nos.1 and 2. The directions in Clause (i), (ii) and (iv) of the said order have a significant bearing on the prayer of defendant No.1 in the instant Notice of Motion. They read as under: (i) That the petitioners of the main petition shall contribute Rs. 5,00,000/- (five lakhs) likewise, the Respondents, barring Company the (Respondent No.1) shall contribute Rs. 5,00,000/-, thus totalling Rs. 10,00,000/- (ten lakhs) i....
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....ge, City Civil Court, in paragraphs 18 and 19 deserve to be extracted, as they also spell out the reason which weighed with the learned Judge in allowing the prayer of defendant No.1. They read as under: "18. On perusal of the rejoinder of defendant No.1, it reveals that there is no whisper whether the compliance was done as per the order of NCLT. The learned Counsel for defendant No.1 submitted new account has been opened as per the direction NCLT but the amounts received were not deposited in the said amount. The details are not placed on record. The defendant No.1 has not given the account of the receipts since 17/05/2018 till the date and the payment of statutory dues to the MCGM This amount to deliberate suppression of the facts by defendant No.1. 19. The income of the company is from building Manek Mahal and it is required to preserve and protect the property of Maneklal Enterprises which is in short of funds to pay the statutory dues of MCGM. The reason for short fall of amount may be whatever. The argument of the Ld. Counsel of defendant No.1 is not acceptable that the plaintiff earlier desired to break the fixed deposit for payment of statutory dues. This....
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....e fact that there was a flagrant violation of the order of NCLT which was passed to ensure payment of the property taxes. In the face of such order defendant Nos.1 and 2 could not have lawfully appropriated the receipts, without express permission of the NCLT, for any other purpose. 24. A situation where the assets of the Company were required to be liquidated to meet a statutory demand, which entails drastic consequences in the event of default, despite prudent management of the affairs of the company, stands on a different footing than a case where despite there being a specific direction by the Court or Tribunal to accumulate the receipts in a separate account and appropriate the proceeds for the discharge of such statutory liability. In the latter case, if in breach of the order of the Tribunal, the amounts are appropriated for different purposes and thereafter the assets of the company are sought to be liquidated for the discharge of the statutory dues, it would give a long leash to the persons who disobey the orders of the Court/Tribunal. 25. Mr. Naik was justified in canvassing a submission that the predicament which defendant No.4 faces is brought about by the conduct....
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....he Bombay High Court cannot be interfered with not even on the ground of closure of factory, as the party responsible, prima facie, for breach of contract cannot be permitted to raise this grievance." (emphasis supplied) 26. I am mindful of the fact that the non-payment of the statutory dues despite their being liquid assets in the form of investment, may entail consequences of the attachment and sale of the only property of defendant No.4 i.e. Manek Mahal. Thus, to ascertain as to what was the extent of the receipt during the intervening period, respondent No.1 was directed to file an affidavit indicating the amounts received in terms of the order of NCLT dated 17th May, 2018. 27. In the additional affidavit dated 28th March, 2013 to which the audited balance-sheet of respondent No.4 from 2018-2019, 2019-2020 and 2021-2022 were annexed the following information regarding total income and expenses of respondent No.4 is furnished in a tabulated form: Year Income form Operations (A) + FDR & Bonds (B) = Total (in INR) Expenses without depreciation (in INR) 2018 - 19 (40,38,624 + 11,62,067 = 52,00,691) 71,75,002.00 2019 - 20 (41,82,110 + 13,22,894 = 55,....
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....ceded to. Had it been a case that the defendant No.1 made a clean breast and placed the entire material including the amounts which were received under the heads rent, property taxes and repair cess, before the City Civil Court and still the City Civil Court considered it appropriate to direct the liquidation of the assets of defendant No.4, to make up the shortfall, the matter could have been appreciated in a different perspective. 33. As noted above, the City Civil Court observed in no uncertain terms that neither the compliance of the order of NCLT was ensured nor the receipts were disclosed. In this view of the matter, the impugned order which does not take into account the prima facie blameworthy conduct of defendant Nos.1 and 2 and non-compliance of the order of NCLT, deserves to be interfered with. The fact that the City Civil Court had directed defendant Nos.1 and 2 to comply with the directions of NCLT, after liquidation of the assets of defendant No.4 and payment of the property taxes, is of no avail in infusing legality and validity into the impugned order. 34. For the foregoing reasons, I am impelled to allow the appeal and set aside the impugned order. At the sam....