Full Text
JUDGMENT
JVG FINANCE LTD & ORS. ..... Petitioners
Through Mr.Kunal Sharma, Adv. for OL
JVG INDUSTRIES LTD.) ..... Respondent
Through Ms.Aakanksha Kaul and Mr.Arun Srivastava, Advs.
Mr.Shailendra Singh and Ms.Rachita Garg, Advs. with Ms.Aneeta Sharma, AR
1. This petition is filed under section 433(e) and (f) readwith section 439 of the Companies Act, 1956 seeking winding up of the respondent company. The petitioners are M/s. JVG Finance Limited, M/s. JVG Foods Limited and M/s. JVG Farm fresh Limited. As these companies are under liquidation the petition is being filed through the OL. The case of the OL/petitioner is that the Central Government received number of complaints from some investors of JVG Group of Companies regarding part payment of deposited amount. The Ministry of Corporate Affairs ordered an investigation into the affairs of the respondent company and an investigation was done by the Serious Fraud Investigation Office (SFIO). SFIO has submitted his report dated 30.6.2009 2019:DHC:2618 Co.Pet.113/2014 Page 2 to Ministry of Corporate Affairs on 3.7.2009. It is pleaded that as per the SFIO report there are Inter corporate deposits to the tune of Rs.23,22,44,266.55/- made by the following three petitioners to the respondent company.:- S.No. Name Company Amount 1 JVG Finance Limited Petitioner 1 18,71,03,306.55/- 2 JVG Foods Limited Petitioner 2 4,51,31,000.00/- 3 JVG Farm Fresh Limited Petitioner 3 9,960.00/- Total 23,22,44,266.55/-
2. SFIO in the course of investigation has also noted that as per the annual return filed by the respondent company, a large number of companies which forms part of the JVG Group which are also in liquidation are holding shares in the respondent company. Petitioner No.1 JVG Finance Ltd. itself is holding 22,99,400 shares in the respondent company. JVG Foods Ltd. Petitioner No.2 is holding 4,24,000 shares and JVG Farm Fresh Ltd. is also holding 4,24,000 shares in the respondent company.
3. The petition also points out that SFIO after investigating the affairs of the JVG Group of Companies concluded that JVG Finance Ltd. i.e. petitioner No. 1 was being operated as a flagship of the JVG Group of Companies. Further, SFIO notes that in the year 1996-97, there was siphoning of funds of the JVG Group of Companies for the purpose of Co.Pet.113/2014 Page 3 acquiring land in District Gurgaon. Large tracts of lands in different villages of District Gurgaon and Mewat were purchased from the funds of petitioner No.1 in the name of other group of companies. As per the report, land measuring 3 Kanal 14 Marlas was purchased for a consideration of Rs.19,42,500/- in the name of the respondent Company from the funds of JVG Finance Ltd. Till date, the respondent company did not return or refund the said amount to JVG Finance Ltd. Hence, the respondent Company remains a debtor to the tune of Rs.19,42,500/-.
4. It has also been pleaded that the affairs of the respondent Company are being conducted in such a way which is prejudicial to the interest of the JVG Group of Companies. The office of the three petitioner companies has not received any notice from the respondent Company of any meetings or received any annual accounts or balance sheets. The aforesaid acts of the respondent Company are clearly prejudicial to the interest of the majority shareholders
5. This Court on 30.4.2012 in CCP (Co.) 17/2007 in Company Petition 265/1998 directed the OL to examine and file a winding up petition against all JVG Group of Companies which are in receipt of money from M/s.JVG Finance Ltd./petitioner No.1. Hence, the OL issued demand notices on the respondent company on 12.12.2013 and 6.2.2013 for recovery of Rs.19,42,500/- towards purchase of land and an amount of Rs.23 crores for Inter Corporate Loans alongwith interest @18% p.a. from the date of making loans till the date of payment. The respondent company has replied vide its letter dated 22.3.2013 denying the liability and has refused to repay any such Inter-corporate loans. Hence, the present winding up petition. Co.Pet.113/2014 Page 4
6. It may be noticed that the respondent company has changed its name from M/s.J.V.G. Industries Limited to M/s. Golden Gate Industries Limited w.e.f. 19.11.2012.
7. The respondent company has filed its reply. In the reply, it has been stated that the present Management had purchased the equity shares and goodwill of the respondent company from the erstwhile owners for consideration. The balancesheets and other documents that were shown to the present Management did not reflect any liability as claimed. It is pleaded that the respondent company is a separate and distinct legal entity and has nothing to do with the JVG Group of Companies. It is also stated that the claim of the petitioner is barred by limitation and the said claim is stale and belated. However, in the reply filed, there is no denial by the respondent regarding the shareholdings by the JVG Group of Companies in the respondent company.
8. One Mr.V.K.Sharma stating himself to be the Ex.Chairman-cum- Managing Director of JVG Group of Companies has filed an affidavit in support of the present petition. He states that the respondent company was incorporated as a Public Limited Company on 26.08.1996 with an authorized share capital of Rs.500 crores. He states that subsequently, the respondent company changed its name M/s Golden Gate Industries Ltd. on 19.11.2012. He states that the act of renaming the respondent company to M/s Golden Gate Industries Ltd. was a deliberate attempt of the respondent as it was done with the purpose of only to reflect that M/s Golden Gate Industries Ltd. was not associated with JVG Group. It was also an attempt to misappropriate the property at 51, Marol Industries Area situated within the Co.Pet.113/2014 Page 5 limits of Mulgaon Taluka Andheri Mumbai. It is also pleaded that under the Companies Act, a company may change its name only by a special resolution and with the approval of the Central Government signified in writing. He states that Mr.V.K.Sharma who has been a major shareholder in JVG Industries Ltd. was nowhere involved at any stage in the process of name change. Petitioner No.1 the Flagship of JVG Group of Companies, a major shareholder, never received any notice of any annual general meeting or any extra ordinary general meeting of JVG Industries Ltd through the said period. It is also stated that one Mr.S.L.Maloo in connivance with some person forged the signature of Mr.D.K.Aggarwal, (the then Director of M/s JVG Industries Ltd., now expired) and Smt. Namrata Kishan (the then Director of M/s JVG Industries) in order to create the forged resignation letters both dated 19.10.2009 to take over the management of JVG Industries Ltd. The above forged documents were filed before the ROC. Then the above said persons also forged the signature of Sh.D.K.Aggarwal on board resolution dated 12.01.2008 while Sh.D.K.Aggarwal was in judicial custody.
9. I have heard learned counsel for the parties. Learned counsel for the OL has pointed out that SFIO in its report has pointed out that large tracts of land were purchased from the funds of JVG Finance Limited, i.e. Petitioner No.1. It has been pointed out that land worth Rs.19,42,500/- has been purchased in District Gurgaon in the name of the respondent company. This aspect it is pleaded is clearly spelt out in the SFIO Report. It is further stated that Inter-Corporate deposits have been given by the petitioner companies to the respondent company which are duly acknowledged in the balancesheets of the respondent company. It is pointed out that for the financial year 31st Co.Pet.113/2014 Page 6 March 1997 to 2004 the balance sheet shows Inter-Corporate deposits of Rs.18,71,03,306.55/- from JVG Finance Limited, Petitioner No.1 Rs.4,51,31,000/- from JVG Foods Limited, Petitioner No.2 and Rs.9,960/from JVG Farm Fresh Limited, Petitioner No.3. He has also pointed out to the legal notice sent by the petitioner. Reply was received on 22.3.2013 from the respondents where it was denied that any finance was used from JVG Finance Limited to purchase the land. It was also denied that Inter-Corporate loan of Rs.23.22 crores is outstanding against the company.
10. Learned counsel appearing for the respondent has submitted as follows:- (i)She has pointed out that against the order dated 30.4.2012 passed in CCP(Co.)17/2017 in Co.Pet.265/1998 an appeal was filed before the Division Bench being Company Appeal No.06/2016. Said appeal was disposed of on 25.10.2016 stating that in a winding up petition which has been filed the respondent would have full rights to project its defence and the Company Judge would pass an order uninfluenced by any observations made by the court in its order dated 30.4.2012, which is only a tentative view. (ii)Secondly, she has relied upon a certificate issued by one Upender Singh as Director on 1.1.2007 stating that the entire JVG Industries Ltd. alongwith equity shares and assets have been sold on consideration to Yare Engineering Private Limited and its associates. This certificate also states that the previous year‟s book entries are not debt due by the company and hence written off as per decision of the Board of Directors. It is pleaded that on account of this resolution the outstanding entries as shown in the books Co.Pet.113/2014 Page 7 of account no longer exist and can no longer be a subject of winding up proceedings.
(iii) It was thirdly pleaded relying upon order dated 27.11.2010 passed in CP
265/1998 regarding JVG Finance Limited that the learned counsel for the main promoter Shri V.K.Sharma had made a statement that the property in question at MIDC Industrial Area, Marol, Andheri, Mumbai belongs to JVG Industries Limited i.e. the respondent and was not purchased from the funds of JVG Finance Limited. It is pleaded that this was an admission on the part of the Ex. Directors that the property in Mumbai is bought from the funds of the respondent company only. To a query from the Court she has pleaded that the company was bought by the present Management from Shri V.K.Sharma in 2007.
11. Learned counsel appearing for the Ex. Directors of the petitioners has relied upon a Memorandum of Agreement dated 6.5.1996 executed between M/s.Orkay Industries Ltd. and JVG Finance Limited and also the deed of assignment dated 30.10.1996 between M/s.Orkay Industries Ltd. and J.V.G.Industries Limited. It is pointed out that the association of JVG Finance with the said transaction is clear from the said documents.
12. It is clear from the above pleadings that an ICD has been made by the JVG Finance Ltd. Petitioner No.1 to the respondent for Rs.18.71 crores by JVG Food Limited petitioner No.2 of Rs.4.51 crores and by JVG Farm Fresh Ltd. of Rs.9,960/-. The relevant balancesheets for the years 31st March 1997 to 31st March 2004 show the intercorporate loans as follows:- Co.Pet.113/2014 Page 8 Source of funds 31.3.1997 31.3.1998 31.3.1999 31.3.2000 31.3.2001 JVG Farm Fresh Ltd. 9,960/- 9,960/- 9,960/- 9,960/- 9,960/- JVG Finance Ltd. 1,87,103,306.55 1,87,103,306.55 1,87,103,306.55 1,87,103,306.55 1,87,103,306.55 JVG Foods 45,131,000.00 45,131,000.00 45,131,000.00 45,131,000.00 45,131,000.00
13. One of the defences raised by the learned counsel for the respondent is reliance on a statement issued of Mr.Upender Singh, a Director of the respondent company on 1.1.2007 which reads as follows:- “This is to certify that the company JVG Industries Ltd. Alongwith equity shares and assets have been sold for consideration to Yare Engineering Pvt.Ltd. and its associates as per the amounts received by the company, its ex.promoters and directors and other associates without passing any liability or encumbrances. It is further clarified that the previous year‟s book entries are not debt due by the company hence already written off as per decision of the board of directors. Signed at New Delhi on 01.01.2007 -sd- Upender Singh Director” Co.Pet.113/2014 Page 9
14. It is not clear as to how this document absolves the liabilities stated in the Statement of Account of the respondent company. Merely because the shares of the respondent company were sold by some of the promoters to the present Management does not wash away liability of the respondent company on account of inter corporate loan received from the petitioner company.
15. In my opinion, the balancesheets of the respondent company, clearly and unequivocally demonstrate the dues payable to the petitioner company.
16. The other aspect as pleaded in the petition relates to purchase of the land in District Gurgaon and Mewat measuring 3 Kanal and 14 Marla for a consideration of Rs. 19,42,500/- for which funds were taken from JVG Finance Ltd. The respondent company continues to owe the said amount of Rs.19,42,500/-. In this context reference may be had to the extracts of the SFIO report which reads as follows:- “Chapter IV Finding No.1: Siphoning off funds to the tune of Rs. 16.29 crore through purchase of land in Distt. Gurgaon, Haryana 4.1.[1] During investigation it is noticed that M/s JVG Finance Ltd. (JVGFL) has issued cheques for payment from its various bank accounts to Shri Sushil Kumar Gupta, Partner of M/s. KSB Associates. Shri Sushil Kumar Gupta appeared on 5.5.2008 and 7.5.2008 before the inspectors and submitted the relevant information/documents to the Investigation and stated on oath that he received Rs 22.80 crores from JVG Group of Companies for purchase of land in District Gurgaon, Haryana. The details of payments received by Shri Sushil Kumar Gupta and relevant portion of his statement dated 5.8.2008 are annexed at (Annexure- 21). Co.Pet.113/2014 Page 10 4.1.[2] He further stated that he received maximum amount from M/s JVG Finance Ltd through cheques signed by Shri Vijay Kumar Sharma and Shri D.K. Kapur. It is revealed from the documents/information submitted by Shri Sushil Kumar Gupta that he purchased land in different villages in District Gurgaon Haryana, as per directions of Shri Vijay Kumar Sharma. The status of land purchased by Shri Sushil Kumar Gupta as on 1/9/1997 is given below:-
┌──────────────────────────────────────────────────────────────────────────────────────┐ │ below:- │ │ Sl.No. Name of Area of land Value of Name of villages │ │ Company in Land of Distt. │ │ whose favour Acare Kanal Marla Gurgaon │ │ land purchased ( In Rs.) │ ├──────────────────────────────────────────────────────────────────────────────────────┤ │ 1. JVG Finance 29 07 17 2,29,88,823 Rangala Bohra │ │ Ltd. Khurd │ │ Sidhrawali, │ │ Hiramanaia, │ │ Rathiwas, Utone, │ │ Peraon │ │ 2. JVG Leasing 22 01 16 1,56,25,787 -do- │ │ Ltd. │ │ 3. JVG Securities 12 06 13 1,60,27,287 -do- │ │ Ltd. │ │ 4. JVG 10 04 03 97,39,955 -do- │ │ Departmental │ │ Stores Ltd. │ │ 5. JVG Foods Ltd. 32 03 09 2,23,19,848 -do- │ │ 6. JVG Housing 27 01 12 1,90,44,730 -do- │ │ Finance Ltd. │ │ 7. JVG Farm 18 05 10 1,42,26,010 -do- │ │ Fresh Ltd. │ │ 8. JVG Hotels 14 02 00 1,41,09,867 -do- │ │ Ltd. │ │ 9. JVG Steels Ltd. 16 03 15 2,09,99,790 -do- │ │ 10. JVG 17 07 11 2,29,05,740 -do- │ │ Petrochemicals │ │ Co.Pet.113/2014 Page 10 │ │ 2019:DHC:2618 │ │ Ltd. │ │ 11. JVG Overseas 26 02 10 2,82,44,937 -do- │ │ Ltd. │ │ 12. JVG Finance & 03 06 13 46,64,790 -do- │ │ Services Ltd. │ │ 13. JVG 00 03 14 19,42,500 -do- │ │ Publication Ltd. │ │ 14. JVG Industries 00 03 14 19,42,500 -do- │ │ Ltd. │ │ 15. Goga Foods 06 02 08 72,45,239 -do- │ │ Ltd. │ │ 16. India Ceroils 01 00 19 26,63,402 -do- │ │ Ltd. │ │ 17. Santosha 01 00 19 26,63,402 -do- │ │ Resorts Pvt. │ │ Ltd. │ │ 4.1.3 Shri Sushil Gupta or his partner has made sale deeds in favour │ │ of, various .above said companies by signing on behalf of these │ │ Companies, as per directions of the Shri Vijay Kumar Sharma, │ │ ex.CMD of JVG Group. Shri Vijay Kumar Sharma has also │ │ confirmed the same as per his letter dated 1.9.1997 and submitted │ │ by Shri Sushil Kumar Gupta as (Annexure-21). It is evident from │ │ above table that Shri Vijay Kumar Sharma with the connivance of │ │ his relatives/associates has purchased land worth Rs. 22.80 crore in │ │ names of various JVG Group Companies, using the funds of M/s │ │ JVG Finance ltd. It is also clear from the letter of Shri Vijay Kumar │ │ 17. It is clear from the SFIO report that the respondent company │ └──────────────────────────────────────────────────────────────────────────────────────┘
18. It is clear from the above acts of the respondent that respondent continues to remain liable to return the land or to pay to the petitioner a sum of Rs.19,42,500/-. In my opinion, there is no bona fide defence raised by the respondent company.
19. In this context reference may be had to IBA Health (I) Pvt. Ltd. vs. Info-Drive Systems Sdn.Bhd., (2010) (4) CompLJ 481 (SC). The Supreme Court held as follows:- “17. The question that arises for consideration is that when there is a substantial dispute as to liability, can a creditor prefer an application for winding-up for discharge of that liability? In such a situation, is there not a duty on the Company Court to examine whether the company has a genuine dispute to the claimed debt? A dispute would be substantial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court, at that stage, is not expected to hold a full trial of the matter. It must decide whether the grounds appear to be substantial. The grounds of dispute, of course, must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be a mere wrangle. It is settled law that if the creditor's debt is bona fide disputed on substantial grounds, the court should dismiss the petition and leave the creditor first to establish his claim in an action, lest there is danger of abuse of winding-up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of winding-up petition as a means of forcing the company to pay a bona fide disputed debt.” Co.Pet.113/2014 Page 13
20. That apart, I may note that under Section 433(f) of the Companies Act, where a court is of the opinion that it is just and equitable, a company may also be wound up. In the present case clear allegations have been made by the petitioners that the petitioners own 22,99,400 shares in the respondent Company. That apart, a total of 59,81,900 shares are owned by the JVG Group of Companies in the respondent company which companies are also in liquidation. Despite having such a large shareholding, no notices are being sent to the Official Liquidator, who is now the Liquidator of the aforenoted various companies, about holding any meetings or sending copies of any balance sheets, annual accounts etc. It is clear that the respondent Company is acting in a manner which is prejudicial to its shareholders and to the affairs of the company.
21. Further, the respondent company was closely linked to petitioner No.1 and the JVG Group. It has been hived off to escape the necessary consequences when the OL took over most of the companies forming part of the JVG Group. There are serious disputes in the manner the present management has taken over the control of the company. In my opinion, it would be just and equitable that the respondent is accordingly wound up. Further the respondent continues to sit on large funds received from the petitioner companies when it was part of the JVG Group of Companies.
22. In this context reference may be had to Hind Overseas Pvt. Ltd. vs. Raghunath Prasad Jhunjunwalla & Anr., (1976 )3 SCC 259. The Supreme Court after considering various case laws laid down the scope of “just and equitable” under section 433(f) of the Companies Act. The Supreme Court held as follows:- Co.Pet.113/2014 Page 14 “33. ……..Besides, it is only when shareholding is more or less equal and there is a case of complete deadlock in the Company on account of lack of probity in the management of the Company and there is no hope or possibility of smooth and efficient continuance of the Company as a commercial concern, there may arise a case for winding-up on the just and equitable ground……..
34. The principle of “just and equitable” clause baffles a precise definition. It must rest with the judicial discretion of the court depending upon the facts and circumstances of each case. These are necessarily equitable considerations and may, in a given case, be superimposed on law. Whether it would be so done in a particular case cannot be put in the straitjacket of an inflexible formula.
35. In an application of this type allegations in the petition are of primary importance. A prima facie case has to be made out before the court can take any action in the matter. Even admission of a petition which will lead to advertisement of the winding-up proceedings is likely to cause immense injury to the Company if ultimately the application has to be dismissed. The interest of the applicant alone is not of predominant consideration. The interests of the shareholders of the Company as a whole apart from those of other interests have to be kept in mind at the time of consideration as to whether the application should be admitted on the allegations mentioned in the petition.
36. The question that is raised in this appeal is as to what is the scope of Section 433(f) of the Act. Section 433 provides for the circumstances in which a Company may be wound up by the court. There are six recipes in this section and we are concerned with the sixth, namely, that a Company may be wound up by the court if the court is of the opinion that it is just and equitable that the Company should be wound up. Section 222(f) of the English Companies Act, 1948 is in terms identical with the Indian counterpart. Section 433(f). It is now well-established that the sixth clause, namely, “just and equitable” is not to be read as being ejusdem generis with the preceding five clauses. While the five earlier clauses prescribe definite conditions to be fulfilled for the one or the other to be attracted in a given case, the just and equitable clause leaves the entire matter to the wide and wise judicial discretion of the court. The only Co.Pet.113/2014 Page 15 limitations are the force and content of the words themselves, “just and equitable”……….”
23. Similarly, reference may be had to the judgment of this court in the case of International Caterers Pvt. Ltd. & Ors. V. Manor Hotel Pvt.Ltd. 122 (2005) DLT 20 where this court held as follows: “34. No doubt, in the case of Hind Overseas P.Ltd. Vs. Raghunath Prasad Jhunjhunwalla and another reported as (1976) 46 Comp.Cas.91, the Supreme Court emphasized that relief under Section 433(f), based on just and equitable clause, is in the nature of a last resort when other remedies are not efficacious enough to protect the general interests of the company and it is not a proper principle to encourage hasty petitions for the winding up of a company without first attempting to sort out the dispute and controversy between the members in the domestic forum in conformity with the Articles of Association. However, at the same time the court accepted that in case the company is based on the principle of quasi partnership, principles of dissolution of partnership shall apply and their application would depend upon facts in a given case recognizing that generally application in a particular case or in all cases creates problems and difficulties. It noted with approval the principles laid down by an English Court In Re. Yenidje Tobacco Company Ltd., reported as (1916) 2 Ch. 426 and other cases where aforesaid judgment is followed, laying down the proposition that in applying the principles of dissolution of partnership to companies, the following factors were important: (1) equal shareholding. (2) complete deadlock in the administration of the company. (3) lack of probity and mismanagement in the conduct of affairs of the company.
35. The court also agreed with the principles laid down by the House of Lords in the case of Ebrahimi Vs. Westbourne Galleries Ltd. (1973) AC 360 wherein after reviewing all the earlier cases it was held as follows: Co.Pet.113/2014 Page 16 "The foundation of it all lies in the words `just and equitable' and, if there is any respect in which some of the cases may be open to criticism, it is that the courts may sometimes have been too timorous in giving them full force. The words are a recognition of the fact that a limited company is more than a mere legal entity, with a personality in law of its own: that there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure. That structure is defined by the Companies Act and by the articles of association by which shareholders agree to be bound. In most companies and in most contexts, this definition is sufficient and exhaustive, equally so whether the company is large or small. The 'just and equitable' provision does not, as the respondents suggest, entitle one party to disregard the obligation he assumes by entering a company, nor the court to dispense him from it. It does, as equity always does, enable the court to subject the exercise of legal rights to equitable considerations; considerations, that is, of a personal character arising between one individual and another, which may make it unjust, or inequitable, to insist on legal rights, or to exercise them in a particular way.... The Superimposition of equitable considerations requires something more, which typically may include one, or probably more, of the following elements:i) an association formed or continued on the basis of a personal relationship, involving mutual confidence- this element will often be found where a pre-existing partnership has been converted into a limited company; ii) an agreement, or understanding, that all, or some (for there may be 'sleeping' members), of the shareholders shall participate in the conduct of the business; iii) restriction upon the transfer of the members' interest in the company-so that if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere.” Co.Pet.113/2014 Page 17
24. The full facts and circumstances of the case would justify the passing of a winding up order.
25. Accordingly, I admit the petition and the Official Liquidator attached to this Court is appointed as the Provisional Liquidator. He is directed to take over all the assets, books of accounts and records of the respondentcompany forthwith. The citations be published in the Delhi editions of the newspapers „Statesman‟ (English) and „Veer Arjun‟ (Hindi), as well as in the Delhi Gazette, at least 14 days prior to the next date of hearing. The cost of publication may be borne by the petitioner from the common pool fund subject to adjustment. The Official Liquidator shall also endeavour to prepare a complete inventory of all the assets of the respondent-company when the same are taken over; and the premises in which they are kept shall be sealed by him. At the same time, he may also seek the assistance of a valuer to value all assets to facilitate the process of winding up. It will also be open to the Official Liquidator to seek police help in the discharge of his duties, if he considers it appropriate to do so. The Official Liquidator to take all further steps that may be necessary in this regard to protect the premises and assets of the respondent-company.
26. List on 10.07.2019.
JAYANT NATH MAY 13, 2019/n/v (JUDGE)