Nasayam Mohammed Feroz v. M/s. Vijetha Agro Farms (India) limited

Judgment

(Per BPR, J) O.S.A.No. 20 of 2009 This Appeal, under Clause 15 of the Letters Patent and Section 483 of the Companies Act, 1956, is at the instance of the unsuccessful applicants who seek to assail the correctness of the order of the learned single Judge, dated 30-06-2009 in dismissing the application filed by them in Company Application No.1607 of 2007 in Company Petition No.128 of 2005, which has been filed by them under Section 457 of the Companies Act read with Rule 9 of the Companies (Court) Rules, 1959, seeking directions for release of the property bearing Dr.No.12-25-12, Ganeneshwar Rao Street (Sivalayam Stree), Kothapet, Guntur from the custody of the Official Liquidator attached to this Court. The facts, in brief, are that the main stand of the applicants in the application was that they have purchased the property in question in view of the offer made by the respondent company therein to raise funds to tide over its financial distress and accordingly, an agreement was entered into and thereafter it had lead to filing of civil suit in O.S.No.20 of 2005 on the file of the III Additional District Judge at Guntur, seeking specific performance of the agreement which ultimately resulted into a compromise memo filed by the parties and the same was taken up before the Lok Adalat which has passed the decree on 28-06-2005, which has resulted in the execution of a regular registered sale deed on 14-07-2005, however the same was kept pending before the Sub-Registrar for want of payment of deficit stamp duty. The claim of the appellants herein was that there is a further transaction to alienate the said property as per the agreement of sale, dated 02-07- 2007 with one Rev. K.V.K. Rao R/o Vanasthalipuram, Hyderabad and substantial amount has already been paid. It is only thereafter the appellants have come to know about the proceedings in C.A.No.128 of 2005 which was stated to have been filed on 14-12-2005 and ultimately the order of winding up came to be passed by this Court on 04-12-2006 in pursuance of which the possession of the property was taken up by the Official Liquidator on 04-04-2007. Hence, the claim is that the applicants are the bona fide purchasers for a value and hence, they are entitled to put back the possession. The application was contested by the respondent-Official Liquidator. It is to be noted that the learned single Judge has taken pains to pierce through the entire chequered events and on correlating to all the circumstances had found by a very detailed reasoned order that the entire transaction, in pursuance of which the appellants claim their title, is vitiated by fraud and therefore, the same is not binding and the appellants are not entitled to any relief, and hence dismissed the application. Aggrieved thereby, the present appeal is filed. On consideration of the submissions made on either side and on perusal of the material on record, the point, which arises for consideration, is as to whether, on the facts and circumstances, the appellants would be entitled to the release of the property in their favour which has been taken possession by the Official Liquidator in pursuance of an order of winding up in Company Application No.128 of 2005, dated 04-12-2006. The undisputed facts are that the company in question namely M/s. Vijetha Agro Farms India Limited, Guntur has involved in serious financial distress subsequent to it’s making substantial activity of raising funds and also purchasing several properties including the one which is claimed by the appellants herein. The order of winding up was passed on 04-12-2006 and the possession was taken up on 04- 04-2007. However parallelly, pleading total ignorance about these proceedings, the appellants claim that they have parted substantial money and purchased the property as per the registered sale deed, dated 14-07-2005 in pursuance of an agreement which is netted into a suit in O.S.No.20 of 2005 and a compromise therein on 28-06-2005. This compromise has been recorded before the Lok Adalat. While considering in minute, the learned single Judge observed that the property in question with its built up area is approximately 29,000 square feet and the value of it can come to Rs.1,45,00,000/- which is apart from the value of the land which is more than 800 square yards. The value of the land itself would not be less than Rs.2 crores. Therefore, the entire market value could be anything not less than Rs.3.5 crores. However, the property was sought to be offered for sale for the penal market value of Rs.50 lakhs. That apart it was also found by the learned single Judge that no publicity was made by the company for the intended sale of the property nor there was any authorization issued by the company in favour of any of its officials or directors either to negotiate or enter into any transaction. There is no resolution passed by the board of directors in accordance with Section 291 of the Companies Act for undertaking the sale of any of the assets of the company. The general body of the company has never been informed about the said transaction. Even though it has been claimed that there is an agreement of sale, which has not seen the light of the day, there is no explanation coming for its non-production. The learned single Judge has also taken into consideration the ages of the applicants individually and found that the entire sale transaction could not have been done by such people. It was also found that in terms of the alleged agreement, the applicants filed the suit on 16-03-2005 and the compromise was made on 28-06- 2005 and ultimately the registered sale deed was executed on 14-07-

2005. The manner in which the entire process is followed up is being doubted quite seriously. Thus taking into account all these facts and circumstances and also for various other reasons and aspects, as pointed out by the learned single Judge, it was the finding that the whole of the said exercise smacks of fraud from the very beginning. It

was also found that the plaintiffs and defendant acting through Sri D.R.K. Singh has played fraud on the Court and they used this process for perfecting it, which is only nothing but to defeat the winding up process and also to defeat the creditors. Thus by taking into account the dropping of certain plaintiffs from the ultimate transaction and the quantum of consideration vis-à-vis the market rate, it was observed by the learned single Judge that tricksters are on the prowl in the society. Further it was also observed that this Court has intervened in the matter in the year 2004 itself by directing the CID of the Police to act promptly on the complaints lodged against the company and its directors. Thus by referring to the principles governing the fraud and the effect thereon, it was held that no right or interest of title can ever pass in favour of the beneficiary of the fraud and further no action can be maintained which is founded in fraud and therefore, the decree passed by the Lok Adalat pursuant to a compromise entered into by and between the parties therein in O.S.No.20 of 2005on the file of the III Additional District Judge, Guntur, was declared as nullity, and consequently, no rights of any kind would ever pass to the hands of the present applicants vis-à-vis the property in question owned and belonging to the company. Having regard to the specific reasons as given by the learned single Judge, which have remained totally unrebutted nor assailed either serious or otherwise on behalf of the appellants, the only attempt in this appeal is to once again fall back on the claim based upon the sale deed, dated 14-07-2005 and to claim as a bona fide purchasers and consequent entitlement thereon. We have once again perused the entire material and also given apt consideration to the above facts and circumstances. We do not find any reason much less nor we have been shown any other reason to come to a different conclusion or to vary with the said reasoning or ultimate finding arrived at by the learned single Judge. In view of the above, we do not find any merits in this Appeal and it is liable to be dismissed. The Appeal is, accordingly, dismissed. No order as to costs. _________________ B. PRAKASH RAO, J __________________ P. DURGA PRASAD, J Date: 30-04-2011 YCR