Darshan Khurana v. M/S PACQUICK INDUSTRIES LTD

1. A brief history of the case requires to be noted. M/s. Pacquick Industries Ltd., hereinafter referred to as the “Company”, had borrowed a sum of `11 crores (approximately) from M/s. Pradeshya Industrial and Investment Corporation of UP Ltd., Lucknow, hereinafter referred to as “PICUP”, for the purpose of its business. The Company had obtained the loan by mortgage of the property at B-54, Sector-57, Noida, U.P. along with the plant and 2013:DHC:3185 machinery. The title deeds relating to the property were handed over to PICUP. Soon the Company ran into rough weather and was unable to re-pay the amount to PICUP. The Company had also borrowed a sum of `62,53,375/- from one Darshan Khurana, sole proprietor of Pioneer Multifilms of Delhi. The Company was unable to re-pay the aforesaid amount also due to falling business. In these circumstances, Darshan Khurana filed Company Petition No.194/2006 for winding up of the Company under Section 433(e) read with Section 434 (1)(a) of the Companies Act, 1956.

2. In order to help the Company tide over its financial difficulties and revive its business, a one-time settlement („OTS‟, for short) was entered into between PICUP and the Company under which the debt to PICUP was settled at `2,29,85,000/-. The understanding was that on payment of the aforesaid sum, PICUP would return the title deeds to the Company and the Company would strive to revive its business.

3. In the meantime a joint application under Order 23, Rule 3 of the CPC was filed in C.A. No.10/2011 recording a settlement arrived at between Darshan Khurana and the Company. The brief terms of the settlement were that Darshan Khurana will pay the amount of `2,29,85,000/- to PICUP and when the company obtains the title deeds from PICUP, the property would be sold to Darshan Khurana. C.A. No.11/2011 was an application filed for impleadment of PICUP in the settlement proceedings.

4. On 07.01.2011 this Court issued notice in both the applications to the standing counsel for PICUP and directed him to file a reply within three weeks. In the interim and subject to further orders of this Court, it was directed that the OTS offer be complied with by the parties by depositing the amount with PICUP. The matter was directed to be fixed again on 01.03.2011.

5. On 01.03.2011 both the applications were taken up by this Court for disposal. The impleadment application (C.A. No.11/2011) was allowed with the consent of the parties and PICUP was impleaded as a party to the proceedings. On the same date this Court also passed an order in C.A. No.10/2011 recording the fact that the OTS amount was already paid by Darshan Khurana to PICUP (on 10.01.2011).

6. On 07.03.2011 this Court passed another order in C.A. No.10/2011 directing that on the filing of an affidavit undertaking payment of RC collection charges levied on PICUP by the concerned District Authorities, “M/s. PICUP is directed to release the original title deeds of documents, property and machinery to the petitioner within a period of two weeks thereafter”. A company petition was filed by PICUP in C.A. No.749/2011 seeking modification of the order dated 07.03.2011, the modification sought for being that PICUP may be directed to release the title deeds to the company and not to Darshan Khurana (who was the petitioner) and also direct the guarantors of the company to file an undertaking to pay the RC collection charges. While disposing of this application by order dated 25.04.2011, this Court directed that keeping in view the terms of the settlement between the parties, PICUP should deposit the title deeds of the property in question with the Registrar of this Court within one week. This order was complied with by PICUP and as of now the title deeds to the property are in the custody of the

7. I have before me today three applications for consideration. Company Application No.906/2011 is an application filed by PICUP asking this Court to issue directions that the title deeds to the property shall not be handed over to Darshan Khurana. Company Application No.13/2012 is also filed by PICUP seeking return of the title deeds deposited with this Court. Company Application No.2437/2012 is filed by one Raj Kumar Arora seeking to purchase the property for `3.25 crores or in the alternative to permit an auction of the property, since according to him the property has been wholly undervalued and was sought to be sold to Darshan Khurana only at `2,29,85,000/-.

8. Before I take up the aforesaid three applications for disposal on the basis of the arguments heard by me from the Company as well as PICUP, I must refer to an order dated 10.04.2013 passed by this Court in Company Petition No.194/2006. In this order it was observed that the action taken by PICUP to cancel the OTS on the ground that the parties did not make full disclosure of the facts cannot be faulted. Apart from this observation, this Court recognised the difficult situation in which Darshan Khurana was placed inasmuch as he had not only not got back the amount of `62 and odd lakhs due from the company, but he has also paid PICUP a further sum of `2,29,85,000/- without getting anything in return till date. Ultimately this Court noted that the Company and Darshan Khurana have certain proposals to make to PICUP and directed them to make them before the Managing Director of PICUP within 10 days, with the further direction that the MD may meet the parties at any date between 13th and 20th May, 2013 after giving at least one week‟s advance notice. The decision taken by the MD was directed to be placed before this Court by 4th July, 2013.

9. At the outset, the learned counsel for PICUP stated that no meeting had taken place between Darshan Khurana and the Company on the one hand and the Managing Director of PICUP on the other till today. He therefore submitted that the proceedings have become infructuous and nothing further needs to be done. That may be so, but that does not impinge on the disposal of the other three applications taken up for hearing today.

10. In support of the applications filed by PICUP, it is contended that the Company and Darshan Khurana have colluded and played a fraud on PICUP. It is stated that the sale of the property mortgaged to PICUP, in favour of Darshan Khurana was contrary to the terms of the OTS and once it came to the knowledge of PICUP, the OTS was cancelled. It is further stated that against the cancellation of the OTS, the Company has filed a writ petition before the Lucknow Bench of the Allahabad High Court and notices have been issued. It is pointed out that the limited scope of the present proceedings is only whether the title deeds should be returned to PICUP pursuant to the cancellation of the OTS. This in fact is the prayer in Company Application No.13/2012. The contention of PICUP in Company Application No.906/2011 is that the title deeds to the property can in no event be handed over to Darshan Khurana as that would prejudice the claims of PICUP drastically. In effect, it is submitted that the logical result of the cancellation of the OTS is that the title deeds should be returned to PICUP.

11. The contention of the learned counsel for the petitioner (Darshan Khurana, Proprietor: Pioneer Multifilms) however, is that the amount of `2,29,85,000/- was paid by him and there is ample documentary evidence on record to prove the same and once the amount has been paid to PICUP in terms of the OTS, and when subsequently the OTS is cancelled, it is idle on the part of PICUP to seek return of the title documents and also seek to hold on to the monies. It is contended that PICUP cannot at the same breath contend that the OTS has been cancelled and also refuse to return the monies to Darshan Khurana. It is pointed out that Darshan Khurana, the petitioner, is not the borrower from PICUP and what he did was only to discharge the amount due to PICUP by the Company. It is further submitted that the terms of settlement between the Company and Darshan Khurana were known to PICUP since PICUP was impleaded as party to the proceedings by an order of this Court passed on 01.03.2011 in Company Application No.11/2011, which order has become final. In these circumstances, it is contended that if PICUP wants to get back the title deeds from the Registrar of this Court, it can do so only on paying the amount of `2,29,85,000/- to Darshan Khurana.

12. I find sufficient force in the submission of Mr. Sibal, appearing for the respondent Darshan Khurana, Proprietor, Pioneer Multifilms in the application filed by PICUP. As rightly pointed out by him, PICUP was impleaded in the settlement arrived at between Darshan Khurana and the Company. After impleadment, PICUP cannot say that any fraud was sought to be played upon it by the Company and Darshan Khurana. In fact, this Court has recorded in its order dated 01.03.2011 in Company Application No.11/2011 that the application for impleading PICUP was allowed with the consent of the parties. PICUP, having consented to the impleadment, cannot now turn around and say that it was not aware of the proposed sale of the property in favour of Darshan Khurana. I am not in the present proceedings concerned with the validity of the action taken by PICUP in cancelling the OTS, which is the subject matter of separate proceedings before the Lucknow Bench of the Allahabad High Court. Even assuming that the cancellation was valid, it gives no right to PICUP to retain the monies which it received from Darshan Khurana on account of the dues of the Company and in full discharge thereof as per the OTS which was then operational.

PICUP cannot take a contradictory stand that it would cancel the OTS and also not return the monies to Darshan Khurana. The argument of the learned counsel for PICUP that PICUP does not recognise Darshan Khurana as its debtor cannot, in the circumstances of the case, be accepted. Technically and legally speaking, Darshan Khurana himself was not the debtor; but the monies came from Darshan Khurana and this was within the knowledge of PICUP.

PICUP was also aware of the source of the monies by being party to the settlement arrived at between Darshan Khurana and the Company. With such awareness, PICUP cannot say that it is entitled to the return of the title deeds and is also entitled to retain the monies paid by Darshan Khurana on account of the debt due by the Company.

13. Mr. Sibal submitted in Court that he should either get the title deeds to the property or get back the money paid to PICUP in discharge of the dues of the Company. For the reasons stated above, I am of the view that PICUP should return the amount of `2,29,85,000/- to Darshan Khurana. It is directed to do so within three weeks. Once the amount is paid as directed, PICUP will be entitled to get back the title deeds from the Registrar of this Court by making a separate application. C.A. No.13/2012 is disposed of in these terms.