CAUSE TITLE:
DEVELOPER GROUP INDIA PVT. LTD v. SURINDER SINGH MARWAH AND OTHERS
DATE OF ORDER:
25th January 2023
JUDGE(S):
HONOURABLE MR. JUSTICE B.R. GAVAI, J.
PARTIES:
Appellant: DEVELOPER GROUP INDIA PVT. LTD.
Respondent: SURINDER SINGH MARWAH AND OTHERS
SUBJECT:
The Hon’ble Supreme Court (hereinafter referred to as ‘Supreme Court’ or ‘the Court’), has set aside the impugned order of the Division Bench of Delhi High Court and held that parties will be given protection and until then they should not bring in any third parties right to the said property.
IMPORTANT PROVISIONS:
Companies act 2013
- Section 337 – states the penalty upon the frauds committed by the officers
- Section 339 - With the caveat that, at a hearing of a request made according to this subsection, the Official Liquidator or the Company Liquidator, as applicable, may present their own testimony or summon witnesses.
BRIEF FACTS:
- The respondents claim that in 2008, they made the decision to invest in a business venture named Festival City Mall at G.T. Road, Ludhiana, Punjab, on the advice of the company's managing director. As a result, a group of banks offered a term loan of Rs. 100 crore. Only 46% of interest was allocated to respondent, which is currently 30%. With effect from August 1, 2008, they were promised refunds; if not, the corporation and its directors would be jointly and severally liable for paying interest at a rate of 2.15% per year on the sum still owed to the respondents. In the project, they were each given 17 stores. But problems arose, and work on the project was put on hold due to which the possession was not given to either the respondents.
- A winding up petition was filed by the respondents against the company where the Delhi High court directed the company to pay Rs. 1.5 Crore to the registrar. The company failed to follow such direction and went into liquidation. Various complaints along with an FIR was filed against the company and the respondents alleging that large amount of money form the company, which was designated for the project purpose, has been allocated differently, siphoned off and averted
- The appellant is an FDI company which entered into a contract with the respondent company with a cost of Rs. 43 crores, for permanent development rights over 11 sites totalling 115 acres in a real estate project which was started by a group of six enterprises. They were not the part of the winding up proceedings; however the respondent company through company application under section 339, 340, 342 and 347 of the said Act restricted any form of transfer of those 11 properties by appellant.
- Further the respondent company stole investor money and transferred it to four intermediary firms which were then transferred to the consortium of six land owning companies. It was stated that six companies had bought the project’s property afterwards where the court banned then from constructing any form of transfer of the property until further orders in interim rulings dated July 11 and August 16, 2018.
- The present appeal has been filed against the order of the division bench of Delhi High Court where the learned Single Judge's interim rulings, issued on July 11 and August 16, 2018, prohibiting the sale, transfer, or alienation of 11 properties acquired by a group of six land-owning corporations, had been revoked. By issuing the contested decision and order and granting the appeal, the Division Bench of the High Court once more prohibited these six entities from selling the aforementioned properties.
QUESTIONS ROSE:
Whether the ruling seeking for the maintaining of the status quo regarding the project's stalling with regard to all 11 properties is reasonable?
ARGUMENTS ADVANCED BY THE APPELLANT
- The order passed is unjustifiable as the company went into liquidation and not the respondents. It has been argued that the company’s funds were not used for the purchase of the said property.
- According to the argument, the Company Court would only have made an order regarding the assets of the Director, Manager, or Officer of the corporation or any other person who is knowingly involved in the way that the stated company is conducting its business in accordance with Section 339 of the aforementioned Act because the liquidation proceedings only pertain to the company.
- The whole project, which spans 115 acres, has been completely put on hold for the small sum sought by respondents, obstructing the current appellant's entire investment.
- In order to safeguard the rights of the respondents, the appellant is ready to provide an assurance that it won't develop a 5-acre area. It is argued that anyone making an investment for business purposes does so at the intrinsic risk associated with such deals, and the respondents' affidavits show that they have only made an investment of about Rs. 4 crore.
- The respondent Company and the other two respondents built the aforementioned "Festival City Mall," thus if any claims are necessary, they may only be filed against the aforementioned Company. As a result, the Respondent Company is in the process of being liquidated, and the respondent may assert their claim there.
ARGUMENTS ADVANCED BY THE RESPONDENT
- The court has already passed the order of injunction and the council has stated that the court has not made any default in proving that the said transactions were made by Dr. Rajesh Aeren.
- The assets in dispute were all secretly purchased with money deposited in the respondent Company. The other two responders, who are investors, have been defrauded by Dr. Rajesh Aeren. Therefore, the Division Bench of the High Court correctly concluded that if a status quo order is not given, fait accompli may follow.
- It has been argued that order dated February 21st 2019 would show that while dismissing the temporary injunction/orders, it had instructed the Official Liquidator to immediately examine the respondent Company's books of accounts and investigate the claims that were the issue of CA No. 788 of 2017.
- It is also state that the claim of the other two respondents is just a few crores at most, on behalf of the appellant and respondent No. 4, according to which the council expressly asked Shri Vivek Kohli the amount of the claim by the respondents. In addition to the respondents Nos. 1 and 2, he claims that he is also speaking on behalf of other deceived investors, and the total amount of all claimants is around Rs. 31 crores.
ANALYSIS BY THE COURT:
- The court set aside the order of the division bench of Delhi High Court. The court also directed the parties to submit the undertaking within four weeks and not constituting any rights of the third party with respect to the disputed property.
- The aforementioned endeavour shall be subjected to any additional orders made by the High Court's learned Single Judge in Company Petition No.482 of 2009
- Upon the report of the Auditor the court will provide the final judgement with regards to the mentioned property within one years from the date of this order
- The court stated that there shall be no order to the costs and rest pending application will stand disposed.
CONCLUSION
The Courts must follow the criteria of a prima facie case, the proportion of practicality, and irreparable harm while issuing an injunction. The entire project, which spans 115 acres, cannot be put on hold, even if it were assumed for a minute that the respondents and the other claimants each had a claim for about Rs. 31 crores. Instead of putting the project on hold, the High Court may have issued a proper order to safeguard the interests of the aforementioned respondents if it had determined that there existed a prima facie case in their favour.
As a result, it is clear that a general order requiring the maintenance of the status quo with regard to all 11 properties totaling 115 acres is unjustified. If such an order is permitted to stand, it will harm the appellant and respondent No. 4 in ways that cannot be undone, and the entire development process would be halted. The interests of the respondents can be safeguarded by ordering the appellant and respondent No. 4 to submit an oath before this court pledging that they won't provide any third parties rights to the contested properties until further orders are made in Company Petition No. 482 of 2009.
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