Reserve Bank of India v. MS JVG Finance Ltd

(vi) It is also further pleaded that the claimants are in possession of the flats up till date. Appropriate documents to the said effect have been placed on record.

(vii) It has been reiterated that in April/May 1996 or 1997 Dr. Sukhbir

Singh was made a director of many companies including JVG Finance Ltd. He was also referred to as Vice Chairman of the Group of Companies in 1996/1997. He had full authority to deal with the said flats.

(viii) It is also pleaded that it was the duty of the OL to record the statements of the directors under Section 454 of the Companies Act 1956 regarding the affairs of the company in liquidation. The OL has failed to discharge this burden and to assist the Committee and an adverse inference should have been drawn against the OL.

10. By order dated 27.11.2010, a Coordinate Bench of this court again directed the OL to take possession of the flats in question. This order has still not been implemented. The claimants thereafter filed objections to the Thareja Committee Report.

11. In the course of hearing of these applications on 4.2.2016 this Court directed the personal presence of the claimants and Mr.Tarun Rathi i.e. the attorney of the claimants. On 25.2.2016, the claimants Ms.Swati Verma. Ms.Sunita P.Aggarwal, Ms.Bharati Bhagwan Jadav and Mr.Tarun Rathi appeared in person alongwith identification proof. The fourth claimant Ms.Gitanjali Kunwar Krishna had moved an application for exemption.

12. I have heard learned senior counsel appearing for the claimants, learned counsel appearing for the OL and learned counsel appearing for the ex-promoters of JVG.

13. Learned senior counsel appearing for the claimants has urged as follows:-

(i) He has strongly urged that in view of the order of the Division Bench of this court dated 18.07.2006, the judgment of the Coordinate Bench of this court dated 04.07.2005 setting aside the judgment of the Bombay High Court dated 21.01.2000 stands set aside. Hence, in view of the consent decree passed by the Bombay High Court which continues to stand, the claimants have a right to the flats in question.

(ii) He further states that four witnesses were produced by the claimant, namely, Dr. Sukhbir Singh, Mr.Tarun Rathi, Mr. Sudhir Kumar. The Thareja Committee has wrongly discarded the evidence of the said witnesses.

(iii) It has been strongly pleaded that the full consideration has been received by JVG. Even earlier transactions by which JVG bought the flats in question were all done in cash. There is no sale deed executed in favour of JVG. In fact, it is only an agreement to sell that was executed in favour of JVG. Hence, it is pleaded that the documents in question were genuine and have been wrongly rejected by the Committee.

14. Learned counsel appearing for the OL has refuted the aforesaid contentions as follows:-

(i) He has pleaded that only a power of attorney holder has sought to prove the title of the claimants. None of the claimants entered into the witness box. He relies upon the judgment of the supreme Court in the case of Janki Vashdeo Bhojwani & Ors. vs. Indusind Bank Ltd. & Ors., (2005) 2 SCC 217 to contend that a power of attorney holder cannot be a substitute for the plaintiff/claimant and any such evidence given on behalf of the plaintiff/claimant has no value.

(ii) He also submits that the claimant at no stage filed the original documents. Only photocopies have been filed which cannot be believed. The documents on the basis of which the titles are claimed are absurd.

(iii) He further stated that the decree of the Bombay High Court has been obtained by fraud and is hence non-est and void. He also relies upon the order the Coordinate Bench of this court to the above effect dated 11.05.2005. He also relies upon the judgment of the Supreme Court in the case of Jai Narain Parasrampuraia & Ors. vs. Pushpa Devi Saraf & Ors., (2006) 7 SCC 756 to contend that a fraud vitiates every act and any order/decree obtained by practicing a fraud is a nullity. It has been reiterated that the consent decree was passed in January 2000 by the Bombay High Court wherein consent was given by Dr. Sukhbir Singh on behalf of JVG. He was not authorised to act on behalf of JVG. This is so as RBI had already passed a prohibitory order on 10.10.1997. The OL was appointed as a Provisional Liquidator by this court on 05.06.1998. In the year 2000, when a collusive decree was obtained fraudulently by the claimant, none of the exdirectors of JVG had any authority to compromise the said suit on behalf of JVG. It was only the OL who was the Provisional Liquidator who had the necessary powers. Hence, it is urged that the decree was obtained by fraud and the claimants have no rights as claimed.

15. I may now deal with the above contentions. I may first notice the observations of this court as stated in order dated 11.05.2005 while dealing with Co. Appl. No. 892/2000 filed by the ex-management. This court had recorded the following findings on the claim of the claimants:- “17. The next question would be about the genuineness of the purported transactions. From the aforesaid description, it would be clear that the authority in favour of Dr.Sukhvir Singh allegedly flows from some Board Resolution dated 3rd January,

1997. Further, all the Agreements to sell record Board Resolutions purporting to accept the proposals of the intervenors for purchase of respective flats. Therefore, after hearing the arguments, the Official Liquidator was directed to file minutes of the Board meetings of the company for period June to August, 1997.

18. On the other hand, payment of entire consideration of Rs.30 lacs in cash by all the four alleged purchasers/intervenors also puts question mark on the authenticity of the transactions. Further, if the property was purchased in the years 1997-1998 and it is not an ante-dated transaction manufactured later but an honest deal, the intervenors must have shown purchase of these flats in the income tax returns. Because of this reason the intervenors were also directed to file income tax returns for the counting year 1997-98 (assessment year 1998-99) indicating whether the purchase of flats in question was shown in their returns or not. They were also directed to file an affidavit stating source of Rs.30 lacs purportedly paid in cash for the purchase of flats in question. Although two weeks' time was given for this purpose, requisite affidavits have not come on record. In the absence of these documents it cannot be conclusively determined as to whether the transactions in question are genuine or not. It may be noted that this court has already appointed a One Man Committee of Mr.G.P.Thareja, retired Additional District Judge, Delhi who is going into large number of such claims filed by many applicants claiming to have purchased flats/land etc. from the company. The claims of these intervenors can also be looked into by him. Clearly, this court noted that the claimants have failed to produce relevant documents to show their titles. However, an opportunity was granted to the claimants to produce their title documents before the Thareja Committee.

16. The Thareja Committee has rejected the contentions of the claimant. I may look at the findings recorded by the Thareja Committee in the light of the above noted facts. The report dated 22.12.2009 amongst others states as follows:-

(i) The report notes that none of the original document has been placed on record by the claimants. Study of documents of all the files reflects for reasons recorded that bogus claims have been preferred by the Attorney- Mr.Tarun Rathi in the name of the four women.

(ii) The Committee notes the statement of accounts filed by Milan

Enterprises on the basis of which it was alleged that the said concern advanced money to the claimant. This alleged loan was the source of funds of the claimant to buy the flat. It is also noted that the statement of accounts does not bear the stamp or certificate of any of the bankers. The report concludes that scrutiny of the documents would reveal that not a single penny of the claimants is at stake. Though a string of borrowing is sought to be created but even at the end of the tunnel there is no proof regarding the payment of consideration that may satisfy the judicial conscience. It is further stated that if such borrowing is made, there is nothing to suggest that an effort was made by the persons lending the money to the extent of Rs.

1.20 crores to take back the money. This conduct itself belies the genuineness of the transaction.

(iii) No original resolution of JVG has been placed on record by the claimants.

(iv) Regarding the agreement to sell in question, it is stated that the document is manufactured for the purpose of the claim at a later stage.

(v) The Committee also notes that Dr. Sukhbir Singh has nothing to do with JVG and that the documents have been filed to commit a fraud before the Committee.

(vi) The Thareja Committee also records that the claimants have not appeared in person to support their claim. However, the report concludes that the documents produced by the OL indicate that it is Sh.Tarun Rathi who had been allegedly occupying the flats after breaking the seal of the Official Receiver of the Bombay High Court. Further it concludes that bogus claims have been made by the said Sh.Tarun Rathi. Had the claims been genuine, the claimants would have appeared in the witness box to submit their claims of the flats.

(vii) On the deposition of witnesses, the Committee states as follows:- “1. I have scrutinized the deposition of Sh. Rathi, POA holder for all four files. His deposition clearly indicates that he has no personal knowledge about the transaction. The documents which he referred in his deposition have already been considered. His deposition is not of any worth particularly because no cogent reason has been given as to why the claimants have not appeared to support their claims. Moreover, a bunch of documents submitted by way of Report by Ms. Richa Kukreja, Dy. Official Liquidator with annexure indicate that it is Tarun Rathi who has illegally occupied the flats after breaking of the seal of the Official Receiver of Bombay. This clearly indicates that bogus claimants have been made to stand by Sh. Rathi. Had the claimants been genuine they would have appeared in the witness box to support the claim of flat. The correspondence produced on record by the Official Liquidator which consists of the application submitted to the Official Liquidator by Sunita Aggarwal whereby she sought three weeks time to vacate the flat shows that the claimants have no capacity to acquire the flats and there is no claim of the claimant as has been set up through Sh. Rathi. Similarly claimant Swati Verma has sought three weeks time for vacating the flat. These applications of the claimant further negate the deposition of Sh. Tarun Rathi. The statement of Sh. Tarun Rathi is otherwise also rejected.

2. Another witness who has been examined is Sh. Sudhir Kumar. The documents reference to which has been made in his deposition has already been rejected. His oral evidence is of no worth. Moreover, Sudhir Kumar claims to have participated in the alleged transaction of loan but there is nothing on record to suggest the consideration for which he participated in the said transaction. Material on record indicates, as already noted, that he has aided the claimants and their attorney in the matter of false claims preferred by the said claimants.

3. Another witness examined is Sh. Sukhbir Singh. This witness has tried to help and aid the claimant by supporting the story set up by the claimant. This witness as per documents produced on record by the claimant was never a director in JVG Finance Ltd. And he went to the extent of making the false statement that he was a director in the said company. He has tried to develop the story that the flat had to be transferred to the claimant on account of the urgent necessity of JVG Finance to satisfy the investors. This witness in his deposition has admitted about the enquiry by the RBI and also admitted that alleged money was received without resolution and in cash. He has also not explained where he deposited this huge amount of Rs. 1.20 crores. Instead he deposed that he does not remember the date of deposit nor does he have any record. He further deposed that it was V. K. Sharma who introduced him to Sh.Tarun Rathi. I have gone through his deposition. It is not worth to be relied upon. Since the documentary evidence produced by the claimant in the form it has been produced has already been rejected. I need not further dilate upon his testimony.

4. The last witness examined is Sh. M. N. Wadhwa, Chairperson of the Panchtantra Society. The said society was constituted on 26.06.2001. He supported the version of the Official Liquidator that the flats belong to JVG Finance Ltd. In flat No. 104 Sh. V.K. Sharma stayed in the year 2002-2003. After 2000[3] none stayed until new occupants forcibly broke open the seal and occupied the said flat. He deposed that in flat no. 504 and 505 Swati Verma and Sunita Aggarwal were staying. They were there before the societies were formed but new persons were staying in the said flats at the time the deposition was made and they had left the flats. Neither Swati Verma nor Sunita Aggarwal are the members of the society. He produced the documents exhibit OW1/1-6. Sunita Aggarwal sought the membership but she was not made member as the agreement she gave had no stamp duty paid nor were registered. The letter Exhibit OW1/10/1 dated 26.06.2001 produced by Sh. Wadhwa shows that flat no. 104 is unoccupied. In flat no. 105 servants often change. In flat no. 504 Pradeep Aggarwal runs some office. In flat no. 505 also some office is run and Swati Verma does not reside there. Under the circumstances the deposition of Mr.Wadhwa is also of no assistance to the claim of claimants.”

17. Based on the above conclusions, the Thareja Committee rejected the claim of the claimants.

18. I now have a look at the nature of documents produced by the claimant-Ms.Bharti Bhagwan Jadhav to claim her title to the flat in question. The documents include Exhibit P-1 which is a GPA executed by the claimant in favour of Mr.Tarun Rathi. Thereafter to prove the transaction, the claimant produced Exhibit P-2 a communication dated 14.07.1997 addressed by the claimant to JVG wherein she states that Flat No. 104 in question has been agreed to be sold to her for a consideration of Rs. 30 lakhs which amount was enclosed alongwith said communication as full and final payment of said flat in cash. The letter also has a thumb impression allegedly of the claimant. On the same date Dr. Sukhbir Singh (presumably) issued a cash receipt of Rs.30 lakhs on behalf of JVG stating that the proposal has been accepted by the Board of Directors and the agreement to sell was purportedly entered on 17.07.1997 copy of which is Exhibit P-4. By the said agreement it is claimed that the property has been sold to the claimant. This document was again allegedly executed by Dr. Sukhbir Singh and Ms. Bharti Bhagwan Jadhav (by affixing her thumb impressions) on the document. A letter dated 17.07.1997 was also written by JVG to the claimant handing over possession/keys of the flat. The above photocopies of unregistered documents are the sum and substance of the title papers of the claimant.

19. To prove the source of funds to purchase the flat, Ms.Bharti Bhagwan Jadhav has filed some documents which include a copy of a letter written by one Sh. Sudhir Kumar, Power of Attorney Holder of Mr.Mukesh C. Shah of Milan Enterprises dated 02.06.1997 whereby it is proposed to give a loan of a sum of Rs. 30 lakhs against the security /purchase of the property being Flat No. 104 to the claimant. A photocopy of a statement of account is placed on record to try and show adequate funds in the account of Milan Enterprises. Exhibit P-8 is an acknowledgement of receipt of Rs. 30 lakhs allegedly received from Sh. Mukesh C. Shah by Ms.Bharti Bhagwan Jadhav. Some notices were sent to Ms.Bharti Bhagwan Yadhav for refund of the money.

20. In this context there are two interesting letters which are placed on record to show as to how the sum of Rs. 30 lakhs was generated by Ms.Bharti Bhagwan Jadhav. One NE Electronic Ltd. on 22.08.1997 offered to sell to Ms.Bharti Bhagwan Jadhav shares worth Rs.30-35 lakhs (approximately). The said NE Electronic Ltd. forwarded the shares to Ms.Bharti Bhagwan Jadhav on 22.08.1997 without receipt of sale consideration. These shares have been subsequently forwarded to Sh.Mukesh C.Shah through the Power of Attorney Holder Sh.Sudhir Kumar as return of the loan of Rs.30 lakhs that was received from the said Sh. Mukesh C. Shah/the concern Milan Enterprises. No consideration has been paid by Ms.Bharti Bhagwan Jadhav to NE Electronic Ltd. for the shares bought from the said company. Some reminders allegedly received from NE Electronic Ltd. addressed to Ms.Bharti Bhagwan Jadhav have been placed on record where the said NE Electronic Ltd. seeks payment of Rs. 30 lakhs with interest for the shares purchased by Ms.Bharti Bhagwan Jadhav. The chain of documents ends there. So as per this chain, Ms.Bharti Bhagwan Jadhav still owes Rs.30 lakhs to NE Electronic Ltd. for the shares bought. That is the manner in which it is claimed that Ms.Bharti Bhagwan Jadhav generated funds for purchase of the flat in question.

21. It is clear that the nature of documents placed on record cannot inspire confidence of a court of law. As already noted above, RBI passed a prohibitory order against JVG on 10.10.1997. As per the said order, JVG was restrained from selling any assets without necessary permission of RBI. The documents above show that the sale transaction appears to have been carried out hastily before the prohibitory order was passed by RBI on 10.10.1997. By means of unregistered documents, sale of a valuable immovable property is sought to be done. The consideration was allegedly paid in cash by the claimant who cannot sign her name. There is no record with JVG showing receipt of this money. To show that the claimant had the means to pay the consideration for the flat, some more suspicious documents are placed on record. One Sh.Mukesh C. Shah (Milan Enterprises) through his Power of Attorney Holder Sh. Sudhir Kumar executes a communication dated 02.06.1997 giving a loan to the claimant of Rs. 30 lakhs, that too in cash. Admittedly, the claimant is unable to refund the loan. The claimant thereafter on 22.08.1997 without paying any amount pursuant to an agreement buys shares of three different companies allegedly worth Rs. 30 lakhs. These shares for which no consideration is paid by the claimant are thereafter sought to be handed over to Sh. Mukesh C. Shah, the proprietor of Milan Enterprises through POA Holder Sh. Sudhir Kumar in lieu of return of the loan amount of Rs. 30 lakhs. There is nothing to show that the seller of the shares, namely, NE Electronic Ltd. was ever paid the consideration for purchase of the shares by the claimant. One cannot but concur with the view taken by the Thareja Committee that the documents are nothing but a camouflage to show as to how the claimant has come in possession of the sum of Rs. 30 lakhs to pay the consideration for the flat in question. In fact the claimant have with no personal contribution of funds have allegedly managed to buy a flat for Rs.30 lakhs.

22. Apart from the nature of the above documents placed on record as noted above, there are other aspects which persuade me to confirm my conclusion that the claimants have failed to discharge their duty to show their title to the flats in question. I may note these aspects also.

23. Firstly, I may note that this court on 11.5.2005 heard arguments on CA 892/2000 and reserved judgment. The Court had directed the claimants to file their Income Tax Return for the Accounting Year 1997-98 Assessment Year 1989-99 indicating whether the purchase of the flats in question was shown in their Income Tax Returns or not. They were also directed to file an affidavit stating the source of Rs.30 lacs which they claim to have paid in cash as consideration for purchase of the flats. This Court while disposing of CA 892/2000 by judgment dated 4.7.2005 noted that despite the above order of this court the claimants have failed to file the Income Tax Returns for the relevant period or to file the concerned affidavit stating the source of Rs.30 lacs. I may note that the Income Tax Returns have still not been placed on record by the claimants to show that they have declared purchase of this flat in their said returns.

24. The second aspect which needs to be noticed is that the claimants have failed to step into the witness box and lead their evidence. A power of attorney holder Shri Rathi has referred to the said alleged title documents in his deposition. The Supreme Court in Janki Vashdeo Bhojwani and another vs. Indusind Bank Ltd. and Others, (2005) 2 SCC 217 on the evidence of an Attorney Holder held as follows:-

No one can delegate the power to appear in the witness box on behalf of himself. To appear in a witness box is altogether a different act. A general power-of-attorney holder cannot be allowed to appear as a witness on behalf of the plaintiff in the capacity of the plaintiff.

18. The aforesaid judgment was quoted with approval in the case of Ram Prasad v. Hari Narain [AIR 1998 Raj 185: It was held that the word “acts” used in Rule 2 of Order 3 CPC does not include the act of power-of-attorney holder to appear as a witness on behalf of a party. Power-of-attorney holder of a party can appear only as a witness in his personal capacity and whatever knowledge he has about the case he can state on oath but he cannot appear as a witness on behalf of the party in the capacity of that party. If the plaintiff is unable to appear in the court, a commission for recording his evidence may be issued under the relevant provisions of CPC. ….

21. We hold that the view taken by the Rajasthan High Court in the case of Shambhu Dutt Shastri (supra) followed and reiterated in the case of Ram Prasad (supra) is the correct view. The view taken in the case of Floriano Armando Luis [(2002) 2 Bom CR 754] cannot be said to have laid down a correct law and is accordingly overruled.”

25. Clearly, a Power of Attorney holder of a party can appear as a witness in his personal capacity. He cannot appear as a witness on behalf of a party. In the present case the claimants themselves have not appeared in the witness box. It is a Power of Attorney Holder who has appeared as a witness on behalf of the alleged title holders of the flat. The Thareja Committee has rightly discarded the evidence of the Power of Attorney Holder as to no effect.

26. The third aspect that I may note which aspect has also been noted by the Thareja Committee is that the claimants have failed to file the original title documents on the basis of which JVG Finance Limited became the owner of the flats in question. It is claimed that these original documents are in the custody of the OL but no credible evidence to that effect has been placed on record. A purchaser of immovable property will normally be in possession of title papers by which the seller of the property claims title.

27. I may also note that the SFIO in its report dated 11.02.2010 has also commented upon the alleged sale of the said flats. The SFIO concludes as follows:- “4.6.11 From the above it is clear that these four ladies were used as front persons to camouflage the dubious sale of these flats by Shri Sukhbir Singh to these ladies. These flats were the properties of M/s JVG Finance Ltd. and were sold unauthorisedly and the proceeds of sale were misappropriated by Shri Vijay Kumar Sharma and Shri Sukhbir Singh. The funds of the company were thus siphoned off by Shri Vijay Kumar Sharma in connivance with Shri Sukhbir Singh.”

28. Hence, the SFIO has concluded that these are fictitious transactions and only a mechanism to siphon the funds by the ex-management through Dr. Sukhbir Singh, the alleged signatory of the documents in question and Mr.V.K.Sharma.

29. In my opinion, the claimants have not been able to show any reason as to why the findings recorded by the Thareja Committee are erroneous or are liable to be set aside. Facts speak for themselves.

30. Reference may be had to Section 542 of the Companies Act, 1956 which reads as follows: "542.

LIABILITY FOR FRAUDULENT CONDUCT OF BUSINESS. (1) If in the course of the winding up of a company, it appears that any business of the company has been carried on, with intent to defraud creditors of the company or any other persons or for any fraudulent purpose, the Court, on the application of the Official Liquidator, or 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 further order as may be necessary for the purpose of enforcing any charge imposed under this sub- section.

(d) For the purpose of this sub- section, the expression" assignee" includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation, mortgage or charge was created, issued or transferred or the interest was created, but does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the ground of which the declaration is made. (3) Where any business of a company is carried on with such intent 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 five 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."

31. A Coordinate Bench of this court in the case of Col. M.R. Bakshi vs. Fintra Systems Ltd. and Anr, 2008 (151) DLT 1 while dealing with 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 conduct for attracting the provision of Section 542 of the Companies Act does not require the same standard of proof as in a criminal trial and the rigours of the law of evidence as apply to a criminal trial would not apply to establish the commission of fraudulent acts and omissions by the Directors and managers of a company. It has also to be kept in mind that by its very nature, fraud is not easy to establish. This is even more so, when the fraudulent conduct is undertaken by the Directors of a company, sitting in their own office, with a view to defraud the creditors/investors who, 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.”

32. Reference may also be had to the works of the learned Author 'A Ramaiya, Guide to the Companies Act, (17th Edition 2010)' where while dealing with Section 542 of the Act, it is stated as follows: "A personal can be 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 particiated in the fraudulent acts of the company Morris v. Banque Arabe et Internationale d'ínvestment SA (No[2]): [2001] 1 BCLC 263"

33. Clearly, given the fraudulent acts undertaken under deceit and camouflage, herein the standard of proof required to prove such fraudulent conduct would necessarily be less. In my opinion, the claimants have completely failed to prove their title to the properties in question. The documents, namely, agreement to sell and the receipt placed on record are make belief. The sale of immovable properties said to have been effected through the unregistered agreement to sell and the alleged receipt of consideration in cash raises grave suspicion on the validity of the sale. The claimants have failed to discharge their onus to prove their title to the properties.

34. I may now deal with another plea strongly raised by the learned senior counsel for the claimant, namely, reliance on the compromise decree passed by the Bombay High Court in favour of the claimant. The compromise decree is based on consents term which reiterates the alleged transaction of sale of the flat.

35. In the case of Ms.Bharti Bhagwan Jadhav the decree was passed on 21.01.2000. A perusal of the decree shows that the consent terms were filed between the plaintiff-Ms.Bharti Bhagwan Jhadva and JVG Finance Ltd. which are said to have been signed by Dr. Sukhbir Singh and Ms.Bharti Bhagwan Jadhav by affixing her thumb impressions on the consent terms dated 21.01.2000. It is an admitted fact that on that date, the OL had already been appointed as the Provisional Liquidator vide order dated 05.06.1998. Under section 450 of the Companies Act the OL was in possession of the entire assets of the company on that date. Under section 446 of the said Act, no proceedings could have been continued against the respondent Company without prior permission of this court. The act of Dr. Sukhbir Singh entering into the settlement terms and not informing the Bombay High Court about the appointment of the OL as Provisional Liquidator is a fraudulent act and an attempt to overreach the orders of this court.

36. In any case, in my opinion, this court vide order dated 04.07.2005 has already held that the said decree of the Hon‟ble Bombay High Court is not binding. This court held as follows:- “16. Furthermore, on the very first date in all these suits and without notice to the Official Liquidator, Dr. Sukhvir Singh appeared through counsel and consent terms were filed on the basis on which suits were decreed. The Bombay High Court was not informed about the liquidation proceedings or the appointment of the provisional liquidator by this court. In fact, it appears, there is no averments made about this order in the suits filed. The company is impleaded as the defendant and after the appointment of the provisional liquidator, it is only he who could represent the company. It is, thus, clear that not only the proceedings in the suits were impermissible as they were initiated without the leave of the court, even they appear to be collusive a well. Such a decree will neither be binding on the official Liquidator or the company and would be void. It is not necessary to take steps for recall of those decrees by filing appropriate proceedings in those sutis. The Company Court seized with liquidated proceedings has ample power to pass necessary directions in this behalf. This aspect is succinctly explained and elaborated by the supreme Court in the case of Sudarsan Chits (I) Ltd. vs. G. Sukumaran Pillai and Others reported as AIR 1984 SC 1579.”

37. The Division Bench of this court on 18.07.2006 in appeal did not set aside the above conclusion. The said order dated 04.07.2005 held as follows:- “Co.App. No. 74-77/2005 and CMs. 7728-29/2006 This appeal can be disposed of as the learned Company Judge has only given direction that the appellants were only to show the source of Rs.30 lacs paid by each of them in cash and therefore, the direction was given to the official liquidator to take possession of the flats immediately as prima facie transactions do not appear to be genuine. It was further stated in the order passed by the learned Company Judge that intervenors were to establish by necessary documentary evidence that they were the genuine purchasers then only orders for restoration of possession can be passed at that time. Counsel for the appellant has contended that they have got the documentary evidence with them and same can be filed in this Court. We think that it is not necessary to keep the appeal pending. The documents can be filed before Shri G.P. Thareja who has been appointed by the Company Court to investigate about the genuineness of the purchase of the flats in question by the appellant. In view of the fact that the appellants are claiming to be in possession of the flats from 1997 as has been told to us by the counsel for the appellant. We direct the appellant to file necessary documents before Shri G.P. Thareja within one week. Shri. G.P. Tharja will hear and decide after giving notice to the parties about the genuineness of the purchase of the flats in question on the basis of the documents within a period of eight weeks. The appellants will continue in possession of the flats till the decision is made by Shri G.P. Thareja. Mr. Jayant Bhusan says that the statement of the counsel for the appellant is not correct as they are in possession of the flats through Raj Nandini Entertainment Pvt. Ltd., and the appellants are not in possession which statement is refuted by the counsel for the appellants. This is the issue that Thareja Committee will decide. Appeal stands disposed of.”

38. Clearly, the Division Bench in its order dated 18.07.2006 did not set aside the findings recorded by the Coordinate Bench of this court on 04.07.2005 as to the effect that the decree passed by the Bombay High Court would be void and would not bind the official liquidator. The said finding remains in operation.

39. Even otherwise, it is manifest that the order passed is contrary to the statutory provisions and not binding. Reference may be had to Sections 446 and 456 of the Companies Act, 1956 which read as follows:

40. Section 446(1) of the Companies Act 1956 reads as follows:-

446. Suits stayed on winding up order. (1) When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced. or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Court and subject to such terms as the Court may impose.

41. Section 456(1) of the Companies Act 1956 reads as follows:- “456. Custody of company' s property. (1) Where a winding up order has been made or where a provisional liquidator has been appointed, the liquidator 2 or the provisional liquidator, as the case may be,] shall take into his custody or under his control, all the property, effects and actionable claims to which the company is or appears to be entitled.

42. Hence, on passing of an order of appointment of a Liquidator, the Liquidator/Provisional Liquidator takes into custody all the properties, effects, etc. of the company. Similarly, under section 446 of the Act after the OL has been appointed as the Provisional Liquidator no suit or other legal proceedings could be proceeded with against the company except with the leave of the court. When the consent decrees have been passed in 2000 the OL had already been appointed as the Provisional Liquidator in 1998. The suit in question pending before the Bombay High Court could not proceed further in any manner. The claimants and the alleged attorney of JVG Dr.Sukhbir Singh have fraudulently withheld this information from the Bombay High Court and got the suit decreed based on alleged consent terms. The said Dr.Sukhbir Singh also had ceased to have any authority as an alleged director on that date to sign the consent terms. Clearly, the said decree is not binding on the OL and is of no effect.

43. In view of the above there is clearly no merit in the application of the claimants. Co. Appl.(C) 2-5/2010 are allowed. Co.Appl. 34/2011 is dismissed. The objections of the claimant to the Thareja Committee Report are dismissed. The OL will take possession of the flats in question forthwith. The OL is also entitled to seek police protection to carry out the orders of this court.

JAYANT NATH, J. JANUARY 10, 2020 rb/n