Developer Group India Pvt. Ltd. vs Surinder Singh Marwah

NON-REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 523 OF 2023 (Arising out of SLP(C) No. 11779 of 2020)

DEVELOPER GROUP INDIA PVT. LTD. ...APPELLANT(S)

VERSUS SURINDER SINGH MARWAH AND OTHERS ...RESPONDENT(S)

JUDGMENT

B.R. GAVAI, J.

1. Leave granted.

2. The present appeal arises from the judgment and order

dated 16th December 2019, passed by the Division Bench of the

High Court of Delhi, thereby allowing a Company Appeal, being

Company Appeal No. 10 of 2019, against an order dated 21 st

February 2019 passed by the learned Single Judge of the High Signature Not Verified Digitally signed by Deepak Singh Date: 2023.01.25 13:14:52 IST Court of Delhi, in Company Petition No. 482 of 2009, wherein Reason: 1 earlier interim orders of the learned Single Judge, dated 11th

July 2018 and 16th August 2018, restraining the transfer,

selling or alienating of 11 properties purchased by a consortium

of six land-owning companies, had been vacated. In allowing

the appeal, the Division Bench of the High Court, vide the

impugned judgment and order, once again restrained these six

companies from alienating the aforesaid properties.

3. The facts, shorn of unnecessary details, are as follows:

3.1 It is the allegation of the respondent Nos. 1 and 2 that in

the year 2008, on the representation of one Dr. Rajesh Aeren,

the Managing Director (MD) of respondent No.3 Company, they

decided to invest in a commercial project called Festival City

Mall at G.T. Road (National Highway No. 1), Ludhiana, Punjab,

being launched by respondent No. 3 Company. In furtherance

of the project, a term loan of Rs. 100 Crore was also availed

from a consortium of banks. The interest of the respondent

Nos. 1 and 2 was limited to 46% of the project, which now

stands at 30%. The respondent Nos. 1 and 2 were assured of

2 returns with effect from 1st August 2008, failing which

respondent No. 3 and its Directors were to be jointly and

severally liable to pay interest @ 2.15% per annum on the

amount remaining unpaid to respondent Nos. 1 and 2.

Respondent Nos. 1 and 2 were collectively allocated 17 shops in

the project.

3.2 The project, however, ran into trouble and the

construction was stalled. Neither the possession was offered

nor was the assured return or the interest thereon given to

respondent Nos. 1 and 2.

3.3 The respondent Nos. 1 and 2, in the year 2009 filed a

winding up petition, being Company Petition No. 482 of 2009,

before the High Court of Delhi, against respondent No. 3

Company. During the course of the winding up proceedings, the

learned Single Judge of the High Court, vide its order dated 19th

December 2015, directed respondent No. 3 to deposit a sum of

Rs. 1.5 crore with the Registrar of the High Court. However, the

said direction was not complied with, and, therefore, vide order

3 dated 18th March 2016 of the learned Single Judge of the High

Court, respondent No. 3 Company went into liquidation.

3.4 It is pertinent to note that there were several other

investors who too had invested in the project. Various

complaints were filed against respondent no. 3 Company and

its Directors which resulted in an FIR No. 6 of 2015 being

registered on 7th January 2015. Subsequently, the investigation

thereon resulted in a charge sheet dated 2nd December 2016,

wherein it was alleged that huge sums of money were diverted,

defalcated and siphoned off from the corpus of respondent No.

3 Company, which was meant to be utilized for the

construction of the project.

3.5 The appellant herein is a 100% FDI company with

investors based in Singapore and Japan. In the year 2014, a

development and management agreement was entered into

between the appellant herein and a consortium of six land-

owning companies i.e. Aeren R. Mallz Pvt. Ltd., Aeren R

Township Pvt. Ltd., Yashraj Buildcon Pvt. Ltd., Yashvardhan

4 Infrastructure Developers Pvt. Ltd., Aeren R Buildcon Pvt. Ltd.

and PMC Entertainment Pvt. Ltd. (now, Fortune R Buildco

Developers Pvt. Ltd., i.e., respondent No.4 herein), for exclusive

developmental rights over 11 properties extending to 115 acres

of land in a real estate project launched by the consortium of

six companies for a consideration of Rs. 43 crores.

3.6 Neither the appellant herein nor the consortium of six

land-owning companies were originally parties to the winding

up proceedings of respondent No.3 Company. Respondent Nos.

1 and 2, on the strength of the aforesaid charge-sheet filed by

the police, preferred a Company Application under Sections

339, 340, 342 and 347 of the said Act, in the winding up

proceedings of respondent No. 3 Company, to injunct the

consortium of six companies from transferring, selling or

alienating the 11 properties.

3.7 It was alleged therein that respondent No. 3 Company

had, in fact, siphoned off the monies of investors to four

intermediate companies, i.e. Aeren R. Enterprise, Everest

5 Buildwell, Global Distributors and AR Developers, who, in turn,

further transferred the money to the consortium of six land

owning companies. These six land-owning companies were,

allegedly, related party Companies of respondent No. 3. It was

further alleged that these six related party Companies had then

purchased the subject land for the Project Mall. Vide interim

orders dated 11th July 2018 and 16th August 2018, the Single

Judge of the High Court restrained the six companies from

transferring, selling or alienating the properties till further

orders.

3.8 Aggrieved by the same, the appellant as well as

respondent No.4 herein preferred applications for vacation of

the aforesaid interim orders which were allowed by the Single

Judge vide order dated 21st February 2019. It may be noted

that, by the same order, Ellahi Goel and Co., Charted

Accountants were appointed as ‘Charted Accountants’ to carry

out an audit of the books of accounts of respondent no. 3

Company to look into the allegations made in the Company

Application.

6 3.9 Aggrieved by the vacation of the interim orders,

respondent Nos. 1 and 2 herein preferred a Company Appeal

against the said order. The Division Bench of the Delhi High

Court, vide the impugned judgment and order, allowed the

appeal, thereby restraining once again the transfer, selling or

alienation of the properties purchased by the consortium of six

companies.

4. We have heard Shri C.A. Sundaram, learned Senior

Counsel appearing for the appellant, Shri Atmaram Nadkarni,

learned Senior Counsel appearing for the respondent No.4 and

Shri Vivek Kohli, learned Senior Counsel appearing for the

respondent Nos. 1 and 2.

5. Shri C.A. Sundaram submitted that the judgment and

order of the Division Bench of the High Court is totally

unsustainable. He submits that the Company under

liquidation is respondent No. 3 herein. It is submitted that

neither the appellant nor respondent No.4 herein has any

concern with respondent No.3. It is submitted that the finding

7 of the Division Bench of the High Court, that the properties,

wherein the appellant had invested an amount of around Rs.66

crores through intermediate companies i.e. A.R. Developers

Private Limited and A.R. Enterprises Private Limited, were

purchased through the funds of respondent No.3, is totally

erroneous.

6. Shri Sundaram submitted that none of the Directors of

the appellant are Directors of the respondent No.3-Company. It

is submitted that under Section 339 of the Companies Act,

2013, the Company Court can pass an order only in respect of

a Director, Manager or Officer of the Company or any person,

who were knowingly parties to the carrying on of the business

in the manner set out in Section 339 of the said Act. He

submits that since the liquidation proceedings are only in

respect of the respondent No.3, the Company Court could have

passed an order only in respect of the properties of the Director,

Manager or Officer of the Company or any person, who is

knowingly party to the carrying on of the business of the

respondent No.3 in the manner set out in Section 339 of the

8 said Act. It is, therefore, submitted that the impugned

judgment and order is totally unsustainable under Section 339

of the Companies Act, 2013.

7. Shri Sundaram further submitted that, the learned Single

Judge of the High Court, vide order dated 21st February 2019

had vacated interim injunction/orders granted earlier, by giving

cogent reasons.

8. Shri Sundaram submits that, in any case, the claim of the

respondent Nos. 1 and 2, the Company Petitioners, is hardly a

few crores. He submits that, for a paltry amount claimed by

respondent Nos. 1 and 2, the entire project admeasuring 115

acres has been entirely stalled, thereby blocking the entire

investment of the present appellant. The learned Senior

Counsel submits that, ex abundanti cautela, the learned Single

Judge of the High Court himself had protected the interest of

the respondent Nos. 1 and 2 by observing that in case anything

contrary is discovered in the course of the audit, the Official

9 Liquidator was free to file an appropriate application with

regard to the properties.

9. Shri Sundaram, in the alternative, submits that the

appellant is willing to give an undertaking, that it will not make

any development for an area admeasuring 5 acres so as to

protect the interests of the respondent Nos. 1 and 2. It is

submitted that the market value of the said area admeasuring

5 acres is about Rs.25 crores and in the event the respondent

Nos. 1 and 2 succeed in the proceedings, the said amount

would be sufficient to meet their claims.

10. Shri Sundaram further submitted that this Court in the

case of Usha Ananthasubramanian v. Union of India1 has

held that the powers under Section 337 and 339 of the

Companies Act, 2013 can be used only insofar as the Company

regarding which the mismanagement is alleged and not to the

business of another company or other persons.

1 (2020) 4 SCC 122 10

11. Shri Nadkarni also supports the submissions made by

Shri Sundaram. He submits that the respondent Nos. 1 and 2

are commercial investors. It is submitted that a person making

an investment for commercial purposes does so with an

inherent risk involved in such transactions. He submits that

the affidavits filed by the respondent Nos. 1 and 2 would reveal

that they have invested only an amount of Rs.4 crore

approximately. It is submitted that, in any case, they had

invested in the “Festival City Mall” project. It is submitted that

the said “Festival City Mall” has been constructed by the

respondent No.3 Company and the respondent Nos. 1 and 2, if

they have any claim, it is only against the said Company. It is

submitted that the respondent No. 3 Company is under

liquidation and the respondent Nos. 1 and 2 can raise their

claim in the liquidation proceedings.

12. Shri Vivek Kohli, on the contrary, submits that the

Division Bench of the High Court, by an elaborate and reasoned

order, has passed an order of injunction. He submits that the

Division Bench of the High Court has rightly, after lifting the

11 corporate veil, found that all these transactions were entered

into by Dr. Rajesh Aeren. He submits that the properties in

question are all bought from the funds invested in the

respondent No.3 Company in a surreptitious manner. He

submits that the said Dr. Rajesh Aeren has played a fraud

upon investors like respondent Nos. 1 and 2. He submits that

the Division Bench of the High Court has rightly found that if

an order of status quo is not passed, it may result in fait

accompli.

13. A perusal of the order of the learned Single Judge of the

High Court dated 21st February 2019 would reveal that while

vacating the interim injunction/orders, it had directed the

Official Liquidator to carry out an audit of the books of

accounts of the respondent No.3 Company and look into the

allegations which were the subject matter of CA No.788 of

2017. The learned Single Judge of the High Court had also

observed that, in case anything contrary is discovered in the

course of the audit, the Official Liquidator was free to file an

12 appropriate application with regard to the properties which

were subject matter of Company Petition No.482 of 2009.

14. We do not find that, in the facts of the present case, it is

necessary to go into the legal issues raised on behalf of the

parties.

15. Though it is contended on behalf of the appellant and the

respondent No.4 that the claim of the respondent Nos. 1 and 2

is hardly of a few crores, we had specifically put a query to Shri

Vivek Kohli as to how much is the claim of the respondent Nos.

1 and 2. He submits that he is also appearing for the other

defrauded investors apart from respondent Nos. 1 and 2 and

the claim of all the claimants would run into Rs.31 crores

approximately.

16. As already stated herein above, Shri Sundaram, learned

Senior Counsel has made an alternative submission that the

properties listed hereunder admeasuring approximately 5 acres

has a present market value of approximately Rs.25 crores.

13

Owner Name Mustil Land Area No./Khasra No. Mustil Khasra Kanal Marla No. No. Yashwardhan Infrastructure 25 17 8 0 Developers Private Limited Village Bonkar Dogran, Tehsil & District Ludhiana- 25 22 1 6 141010, Punjab 25 23 7 7

25 24 7 7

Liwpool Township Private 25 13 8 0 Limited (Earlier known as Aeren R. Township Private Limited) Village Bonkar 25 18 8 0 Dogran, NH-44 (1), Near Ladhowal Toll Plaza, Tehsil & District Ludhiana-141008, Punjab Total 39 20

5 Acres

17. While passing an order of injunction, the Courts are

required to be guided by the principles of prima facie case,

balance of convenience and irreparable injury. We find that,

assuming for a moment that the respondent Nos. 1 and 2 along

with the other claimants have a claim of around Rs.31 crores,

the entire project in an area of 115 acres cannot be stalled. If

14 the Division Bench of the High Court found that, there was a

prima facie case in favour of the respondent Nos. 1 and 2, they

could have passed an appropriate order to protect the interests

of the said respondents rather than stalling the entire project.

18. It is further to be noted that the audit report dated 16th

January 2023 of Ellahi Goel & Co., Chartered Accountants

would reveal that an amount of Rs.66.18 crores has been

received by A.R. Developers Private Limited as sale

consideration of shares of AERENS ENTERTAINMENT ZONE

LIMITED from Mondon Investments Ltd. It is further to be

noted that part of the amount received by A.R. Developers

Private Limited has been used to pay Rs.52.76 crores to the

consortium of six land-owning companies as “Advance against

Future Projects”.

19. We are, therefore, of the considered view that a blanket

order directing maintenance of status quo in respect of the all

11 properties admeasuring 115 acres is not justified. If such

an order is allowed to continue, it will cause irreparable injury

15 to the appellant and the respondent No.4 inasmuch as the

entire development would be stalled. Insofar as the interests of

the respondent Nos. 1 and 2 are concerned, the same can be

protected by directing the appellant and the respondent No.4 to

file an undertaking before this Court that until further orders

are passed in Company Petition No.482 of 2009, they shall not

create any third party rights in respect of the properties

mentioned in Paragraph 16 herein above.

20. In the result, we pass the following order:

i. The appeal is partly allowed.

ii. The impugned judgment and order dated 16th

December 2019 passed by the Division Bench of

the High Court in Company Appeal No. 10 of 2019

is set aside.

iii. The appellant and the respondent No.4 are directed

to file an undertaking before this Court within four

weeks from the date of this judgment that they

shall not create any third party rights in respect of

16 the properties mentioned in Paragraph 16 herein

above.

iv. The aforesaid undertaking will be subject to further

orders to be passed by the learned Single Judge of

the High Court in Company Petition No.482 of

2009.

v. After the final Audit Report is submitted by the

Auditor/Chartered Accountants appointed by the

learned Single Judge, the learned Single Judge of

the High Court would pass final orders with regard

to the properties in respect of which the

undertaking is to be given by the appellant and the

respondent No.4.

vi. We request the learned Single Judge of the High

Court to decide the issue regarding final orders

with regard to the said properties mentioned in

para 16 as expeditiously as possible, and,

17 preferably, within a period of one year from the

date of this order.

21. There shall be no order as to costs. Pending Applications,

if any, shall stand disposed of.

…..….......................J. [B.R. GAVAI]

…….........................J. [VIKRAM NATH]

NEW DELHI;

JANUARY 25, 2023.

18