TMI Blog2019 (10) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... . The best evidence was available with the applicants which they have chosen not to place on record. Only as a mechanism and ploy to delay the proceedings this desperate plea is being taken that this court may frame issues and record evidence - petition dismissed. - CO.PET. 351/1999 - - - Dated:- 18-10-2019 - MR. JAYANT NATH J. Petitioner Through: Mr. Sanjeev Ralli, Mr. Atul Verma and Ms. Urvi Kohli, Advs. for the Court Appointed Committee with Lt. Col. P.M. Dubey, Chairman Court Appointed Committee Member. Mr. Ramesh Babu, Ms.Manisha Singh and Ms. Sanya Panjwani, Advs. for RBI. Ms. Ruchi Sindhwani, Sr. Standing Counsel with Ms. Meghna Bharara, Adv. for the Official Liquidator. Mr. Ravinder Sethi and Mr. Ravi Kant Chadha, Sr. Advocates with Mr. Dhiraj Sachdeva and Mr. Puneet Sharma, Adv. for M/s Goga Foods Ltd.(Applicant) CA Nos. 652/2007 1445/2013 1. This winding up petition is filed by Reserve Bank of India under Section 45 MC of the RBI Act seeking winding up of the respondent Company. It has been stated in the petition that the respondent company is a non-banking financial company and has been found to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the applicant company noticed some officials were trying to demarcate the land of the applicant company and the neighbouring land of Hoffland Finance Limited and Hoffland Engineers Limited pursuant to orders passed by this court. It is pleaded that at present the said applicant company has no connection with the Hoffland Group of Companies. Initially Shri B.B.Sharma was the promoter and was running the applicant company. However, he has exited in 1995 and transferred his shares and resigned on 7.3.1995. It is further stated that being a public limited company there is investment of more than 2.75 crores of public at large, it is not connected with the Hoffland Group. Hence, the present application. 8. CA No.1445/2013 substantially reiterates the above contentions stated in CA 652/2007. It has been pleaded that despite the fact that the applicant company has no connect with the Hoffland Group of Companies, the Court Appointed Committee is insisting that the applicant company is part of the Hoffland Group of Companies. Hence, it is pleaded that in a claim of this nature disputes of serious nature have arisen. It would be appropriate that this court may frame issues and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fraudulently became Directors of Goga Foods Limited in connivance with one Mr. Om Vir Singh. They forged relevant records and transferred in their own names the whole of share capital of ₹ 5.8 crores. 10. The Court Appointed Committee has also filed a reply broadly reiterating the same facts. It has been reiterated that on 5.9.2008 this court had directed Goga Foods Limited to submit complete details of the transactions, instruments of transfer, payment of monetary consideration and other particulars which have not been done till date. Subsequently, in 2013 an affidavit was filed of Shri Kailash Chand Jain which did not contain details as sought for by the Court by its order dated 5.9.2008 and subsequent orders. This court on 19.7.2013 taking into account the entire background rejected the submission of Goga Foods Limited to refer the matter for recording of statement of deponents and cross-examination. This order has attained finality. Hence, the question of asking parties to lead evidence would not arise. It has been reiterated that there is nothing placed on record to show existence of any resources of Goga Foods Limited which enabled the said company to buy the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Valliammal (D) By LRs vs. Subramaniam Ors., 2004(7) SCC 233 to contend that there is a presumption in law that the person who purchased the property is owner of the same. The court also held that the heavy burden lies on the person who pleads that the recorded owner is a Benami holder. 12. Learned senior standing counsel for the OL Mrs.Ruchi Sindhwani has submitted as follows:- (i) That three of the companies, namely, Goga Foods Limited, Hoffland Engineers Limited and Hoffland Remedies Limited from the funds of Hoffland Finance Limited bought the land in the area in question between 1991-95. Reliance is placed on the reports of the Economic Offences Wing to confirm the said fact. (ii) It is further pleaded that the land of the three companies as noted above including Goga Foods Limited are intertwined in a manner to show that the same entity bought the land. This is apparent from the report of the SDM. (iii) It is further pleaded that the balance sheet of Goga Foods Limited for the year 1991-95 show that the company was suffering losses as there was no profit. There was also no business being conducted by the company. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oper books of account were not kept by the company throughout the period of two years immediately preceding the commencement of the winding up, or the period between the incorporation of the company and the commencement of the winding up, whichever is shorter, every officer of the company who is in default shall, unless he shows that he acted honestly and that in the circumstances in which the business of the company was carried on, the default was excusable, be punishable with imprisonment for a term which may extend to one year. (2) For the purposes of sub-section (1), it shall be deemed that proper books of account have not been kept in the case of any company, if there have not been kept (a) such books or accounts as are necessary to exhibit and explain the transactions and financial position of the business of the company, including books containing entries made from day to day in sufficient detail of all cash received and all cash paid; and (b) where the business of the company has involved dealings in goods, statements of the annual stocktakings and (except in the case of goods sold by way of ordinary retail trade) of all goods sold and purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent or for such purpose as is mentioned in sub-section (1), every person who was knowingly a party to the carrying on of the business in the manner aforesaid, shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to fifty thousand rupees, or with both. (4) This section shall apply, notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the declaration is to be made. 17. A Coordinate Bench of this court in the case of M.R. Bakshi vs. Fintra Systems Ltd., 2008 (151) DLT 1 on Section 542 of the Companies Act, 1956 held as follows:- 10. Having considered the respective submissions I am, as at present advised, inclined to agree with the submissions of Mr. Rajiv Shakdher, Sr. Advocate the learned Amicus Curiae. Keeping in view the purpose for which Section 542 has been enacted, and the fact that timely action is of the essence, not only to prevent the presentation of a fiat accompli by the fraudulent Directors of the company, but also to provide relief to the victims of the fraud, it seems that the establishment of the fraudulent condu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siphoning them out in one way or another. That seems to have been the true business activity of the promoter Directors and managers of the company. No other business appears to have been conducted by the company with a view to earn profits for the company, its shareholders and creditors. In the aforesaid process, the entity of the company has been misused and exploited. 12. From the aforesaid reports of the CBI, prima facie it appears to me that this is a fit case for holding the directors of the company in liquidation personally liable, without any limitation of liability. Section 542 is an exception to the general rule that in a limited liability company, the liability of the shareholders and directors is limited. The purpose and object of Section 542 is to catch up with the fraudulent directors and other persons responsible for defrauding the creditors and shareholders of the company, who deliberately conduct the affairs of the company in a manner as to rob the company of its resources and allow it to bleed. Conduct, which does not appear to be bona fide or innocent, or a mere judgmental error, but which personally enriches the Directors/managers of the company dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held liable for fraudulent trading, if he assisted in the commission of the fraud. It is not necessary that he should be actively involved in the management of the company. The court said that as a matter of ordinary language the section was not restricted to those who performed a managerial role. Moreover, the legislative history of the provision pointed towards a wider interpretation, extending not only to a person who carried on business or assisted in the carrying on of the liquidated company s business but also to a person who had participated in the fraudulent acts of the company Morris v. Banque Arabe et Internationale d investment SA (No2): [2001] 1 BCLC 263. 20. Clearly, given the manner in which fraudulent acts are undertaken under deceit and camouflage, if done with the affairs of a company, the standard of proof required to prove such fraudulent conduct would necessarily be less stringent. 21. I may now see some of the facts brought on record by the OL and by the Committee which the applicants have not been able to rebut or explain. The said facts are now spelt out: [I] 22. I may first take note of statements made by Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [III] 26. Another important aspect which comes out from the submissions made by the OL and the Committee Appointed by the court is the manner in which the properties have been purchased. It has been stated by the OL, which aspect is not denied by the applicants, that the lands in question in Village Khekra, District Baghpat of Goga Foods Ltd. and Hoffland Engieers Ltd. are interspersed and it is difficult to separate the two. A map as given by the SDM has been placed on record to demonstrate the above submision. It has futher been pointed out that the factory of Goga Foods Ltd. has 22623 sq. meters land out of which 5257 sq. meters land is in the name of Hoffland Engineers Ltd. Further, land in the name of Goga Foods Ltd. is also situated outside the factory premises. Meaning thereby, no demarcation was attempted to be made to identify spearately the lands that belong to Goga Foods Ltd. and the land that belongs to Hoffland Engineers Ltd. There is no explanation how the applicant is sitting on land belonging to Hoffland Engineers Ltd. and has taken it as part of the factory. The map which has been filed by the OL which is said to have been given by the SDM is as follows:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icant company and Hoffland finance Limited. It is an admitted fact that Mr.B.B.Sharma resigned in 1995. At that time he held substantial shares in Goga Foods Limited being the promoter of the same. In his statement dated 20.6.2007 recorded before the Committee Constituted by the Court he has said that he held more than 2 lac shares in Goga Foods Limited having face value of ₹ 10/- and that the shares have never been transferred to anyone else. He also states that the original of these shares alongwith transfer deeds were kept in private safe deposit vault in South Delhi by the Chief Manager but the whereabouts of the Chief Manager are not known. Thereafter the said Mr. B.B.Sharma has been in custody for a long time. The present management claims to have bought the shareholding in 2003. No details are provided as to how and from whom the present management bought the shareholdings in 2003. There is no detail given as to how from 1995-2003 the shareholding and management of Goga Foods Limited was transferred out of the hands of Mr. B.B.Sharma and was bought by the present management. The present management when they took over in 2003 must have purchased shares from somebody and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 stating as follows:- 11. On a careful consideration of the rival arguments, I am of the view that Mr. Ralli is right in his submission that this Court is not bound to receive the affidavit in evidence if it does not strictly conform to the directions of this Court in its order dated 05.09.2008 reiterated in the later order dated 21.05.2013. It is not the case of the learned counsel for the GFL that the affidavit contains all the requirements as directed by orders of this Court referred to above. He has not drawn my attention to the Bank statements, statement of account with the Banks and the Bank instruments, which were directed by this Court to be filed with the affidavit. The directions of this Court have to be scrupulously complied with. The purpose of the affidavit is to give an opportunity to GFL to show the source of funds for the acquisition of the land. The entire matter emanates from the apprehension expressed by the Official Liquidator that the funds of HFL were siphoned off and utilised in purchasing assets for sister concerns including GFL. This apprehension is recorded in the order of this Court passed on 05.12.2003 in Company Application No.777/2003 in C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t only reiterate this fact. What is in dispute is the source of acquisition and that can be located with precision only from the Bank statements, statements of account with the Bank, details of Bank instruments, etc. In their absence the affidavit would serve no useful purpose. 12. Having regard to the facts of the present case, I do not consider it necessary to discuss the judgment of the Division Bench of this Court (supra). 13.For the above reasons I do not see any reason for taking the affidavit, as presently filed, on record. 33. It clearly follows from the above order that the applicant company has been unable to explain the source of funds for acquisition of the land. The applicant has not been able to show bank statements, the statement of accounts, Bank Instruments etc. Despite several opportunities the records which would normally be in the power and possession of the applicants have been deliberately hidden from the court. This clearly raises a strong suspicion about the acts and conduct of the applicants. 34. Reference in this context may be had to the judgment of the Supreme Court in Union of India vs. Ibrahim Uddin, 2012 8 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, despite directions of this court dated 5.9.2008 and subsequently, the applicants have failed to produce relevant documents to show the details. Clearly, this court would draw an adverse inference against the applicants for having withheld from the court the most relevant documents/important documents to show that it is not a part of the Hoffland Group and the funds for purchase of the land in question were not of the Hoffland Group but of the applicant company. 36. A strong plea that has been raised by the learned senior counsel for the applicant that the conclusion should not be drawn against the applicant without an opportunity to the applicant to lead evidence after framing of issues. This plea is misplaced. As already noted above this court had on 19.07.2013 rejected the affidavit filed by the applicant pursuant to the orders of this court dated 05.09.2008. This court noted that the affidavit filed by the applicant five years after the order of the court without relevant documents is a ploy only to delay the proceedings. This court rejected the contention of the applicant seeking cross-examination of the deponent as it was noted that nothing can be gained from looki ..... X X X X Extracts X X X X X X X X Extracts X X X X
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