Shailesh P Gonawala & Anr vs Shree Saisang Associates Pvt Ltd & Ors

[Arising out of order dated 26.04.2021 passed by the National Company Law Tribunal, Ahmedabad Bench, Ahmedabad in IA 608 of 2019 in C.P. No. 68/NCLT/AHM/2017]

IN THE MATTER OF: 1. Shri Shailesh P Gonawala, 3/1884, Chandi Bhavan, Khangad Sheri, Salabatpura, Surat-395003. ...... Appellant No 1. 2. Shri Rameshchandra A Morawala, 8, Abhinav Park, Ghod Dod Road, Surat-395001. ...... Appellant No 2.

Versus 1. Shree Saisang Associates Pvt. Ltd. 3/2169, Near Ram Mandir, Salabatpura, Surat-395001. ....... Respondent No. 1. 2. Shailesh U. Vakharia, 15, Narayan Bldg, B/H, Rajhans Talkies, Vesu, Surat-395007. ....... Respondent N. 2. 3. Navinchandra P Indorwala, 22/23, Bhairav Nagar, PO Bhestan, Udhna, Surat-395023 ....... Respondent No. 3. 4. Indrajit H. Mashruwala, 3/2020, Sidhi Sheri, Salabatpura, Surat-305003. ....... Respondent No. 4. 5. Harishchandra C. Marvawala, Khangad Sheri, Salabatpura, Surat-395003. ....... Respondent No. 5. 2

6. Kamlesh C. Gotawala, 3-1928, Sidhi Sheri, Salabatpura, Surat-395003. ...... Respondent No. 6. 7. Manoj Kumar H. Singapuri, 202/2nd Floor, Shradha Saburi Apt., Khanbhati Wadi, Rustampura, Surat-395002. ....... Respondent No. 7. 8. Kiritkumar R. Vanawala, 3/2350, Khangad Sheri, Salabatpura, Surat-395003. ....... Respondent No. 8. 9. Registrar of Companies, ROC Bhavan, Opp Rupal Park Society, Behind Ankur Bus Stop, Naranpura, Ahmedabad-380013. ....... Respondent No. 9. Performa Respondent. 10. National Company Law Tribunal Ahmedabad. ...... Respondent No. 10. Performa Respondent.

Present: For Appellant: Mr. Suryanarayan Iyer, Ms. Garima Bajaj, Advocates. For Respondent: Mr. Dhiren R Dave, Advocate for 1 to 8.

JUDGMENT

(23rd February, 2023) Justice Anant Bijay Singh;

The instant Appeal preferred under Section 421 of the Companies Act,

2013 against the order dated 26.04.2021 passed by the National Company Law

Tribunal, Ahmedabad Bench, Ahmedabad in IA 608 of 2019 in C.P. No.

68/NCLT/AHM/2017 whereby the application i.e. I.A. No. 608 of 2019 filed by

Company Appeal (AT) No. 81 of 2021 3

the Applicant / Appellant herein for recall of the order dated 23.11.2017 passed

by the Tribunal in CP No. 68 of 2017 where the Tribunal passed the following

order:

"9. That apart, this Adjudicating Authority is not vested with

the power to review/recall of its own order either under Section

60(5) of the IB Code or Rule 11 of the NCLT Rules 2016. Further,

Hon'ble NCLAT in Company Appeal (AT) (Insolvency) No. 848 of

2019-Deepak Kumar vs. M/s. Phoenix ARC Pvt. Ltd., while

dealing with the matter Hon'ble NCLAT observed that:

".....power to 'Review' is not an 'inherent power' and must

be showered by Law either expressly or by necessary

implication. As a matter of fact, the power to 'Review' is

acreation of statute. Indeed, a 'Review Jurisdiction' cannot

be pressed into service as an 'Appellate Jurisdiction'.

Moreover, the 'Power of Review' is not to be confused with

an Appellate power.

It is further observed that;

"23. A mere perusal of the 'NCLAT' Rules, 2016 unerringly

point out that there is no express provision for 'review' and

further that the Review Applicant/Appellant cannot seek

the aid of rule 11 of the 'NCLAT' Rules, 2016 which speaks

of inherent powers. Also, that the Review Applicant cannot

seek umbrage under section 420(2) of the Companies Act,

Company Appeal (AT) No. 81 of 2021 4

2013 for filing the 'Review Application' on the purported

ground of rectifying any mistake apparent from the record,

within two years from the date of order passed, in the

considered opinion of this Court.

10. Thus, under the facts and circumstances discussed in

sequel herein above, the application so filed by the Applicant for

recalling of the order dated 23.11.2017, along with other

prayers, are not only beyond the jurisdiction of this Tribunal but

also bad in the eye of law and is not maintainable. Hence, the

instant application is rejected and stands disposed of."

2. The facts giving rise to this Appeal are as follows:

i) The Respondent No. 1 company was registered on 30.05.2017 as a private

limited company for the business of construction and dealing in real estate, that

is, buying, developing and selling of vacant plots as well as constructed houses.

The Appellant no. 1 herein was originally holding 50% of the share capital of

Respondent No. 1 Company. Subsequently, new shareholders were introduced.

The Respondent No. 1 company purchased 35,511 m2 of land at Bhestan, Surat.

The said land was developed into 179 plots. In part of the land, Sai Unity Row

Houses was constructed.

ii) Further, on 15.12.2009, Board of Directors of Respondent No. 1 Company

authorised Appellant No. 1 to deal with and execute sale deeds on behalf of

Respondent No. 1 company. The Appellant No. 1 executed 67 conveyance deed

since of various buyers of the row houses/plots till 19.07.2013. In June 2013,

Company Appeal (AT) No. 81 of 2021 5

the Appellant No. 1 came to know from the mamlatdar office that Respondent

No. 2 Shri Shailesh Vakharia was also executing conveyance deeds on behalf of

Respondent No. 1 company. On further enquiry, it was learnt that a resolution

was passed allegedly on 02.05.2013 in the board meeting without any notice to

the Appellant No. 1 authorising Respondent No. 2 to execute sale/conveyance

deeds on behalf of Respondent No. 1 company.

iii) The disputes multiplied between the Appellants and Respondents. On

11.12.2014, the Respondent No. 2 filed an FIR against the Appellant No. 1. The

Appellant No. 1 was in judicial custody from 11.12.2014 to 02.01.2015. On

02.01.2015, the Hon'ble High Court of Gujarat granted bail to the Appellant No.

1 with condition of deposit of Rs. 134.44 lakhs in the High Court. The Appellant

No. 1 deposited the amount as per the condition of the bail order. Further, on

the Appellant No. 1's application, the Hon'ble High Court of Gujarat stayed

further investigation in the FIR against the Appellant No 1 vide orders dated

24.08.2015.

iv) Further case is that the statutory Auditor S. B. Vaidya & company,

Chartered Accountant's resigned from the auditorship of Respondent No. 1

company on 21.03.2016. Vide letter dated 17.03.2017, Respondents denied

inspection of records of Respondent No. 1 company to the Appellant No. 1. A

notice dated 21.04.2017 was issued to the Appellant No. l convening an

Extraordinary General Meeting on 20.05.2017 for removal of the Appellant No. l

from the directorship of Respondent No. 1 company. The Appellant no 1 sought

cancellation of the Extraordinary General Meeting and objected to the meeting,

Company Appeal (AT) No. 81 of 2021 6

both in writing against the proposed removal of the Appellant no. 1 from the

board of directors of Respondent No 1 company.

v) The Appellants filed Company Petition No. 68 of 2017 due to the series of

oppression against the Appellants herein and mismanagement of Respondent

No. 1 company. Vide order dated 23.11.2017 (at page 619 to 653, Vol.-IV of the

Appeal), the National Company Law Tribunal, Ahmedabad, dismissed the

aforesaid Company Petition. Against the order dated 23.11.2017 passed by the

National Company Law Tribunal, Ahmedabad, the Appellants herein filed

Company Appeal (AT) No. 13 of 2018 before this Appellate Tribunal and after

hearing the parties this Appellate Tribunal dismissed the aforesaid Appeal vide

order dated 23.05.2018 (at page 787 to 804, Vol.-V of the Appeal). Thereafter, the

Appellants herein filed a Special Leave Petition before the Hon'ble Supreme Court

of India against the order dated 23.05.2018 passed by this Appellate Tribunal.

Further, vide its order dated 10.08.2018 in Civil Appeal No. 6869 of 2018 (at

page 1025, Vol.- VII of the Appeal), the Hon'ble Supreme Court dismissed the SLP

filed by the Appellant.

vi) Further case is that based on information received subsequent to filing of

the SLP before the Hon'ble Supreme Court of India by the Appellants that

Respondent No. 1 Company's Directors are disposing of the plots of Respondent

No. 1 company without executing any sale deeds and without accounting any

receipts in the books of accounts of Respondent No. 1 company, Appellants

herein visited the plots of Respondent No. 1 company. The Appellant No. l found

that construction work is going on in 6 plots shown as unsold in the books of

Company Appeal (AT) No. 81 of 2021 7

Respondent No. 1 Company by unknown parties. The Appellants verified the

records in the Sub-Registrar Office, Surat and also through Right to Information

Act, 2005 (RTI for short) sought information from Surat Municipal Corporation,

about details of property tax being paid for the unsold plots of Respondent No. 1

Company.

vii) The sale deeds executed by Respondent no. 2 Shri Shailesh Vakharia as

available in the office of the Sub-Registrar, Surat when compared with the details

of property tax payments for the unsold plots of Respondent No. 1 Company

received from the Surat Municipal Corporation through RTI showed that for a

number of plots shown as unsold by Respondent No. 1 Company in its books,

property tax has been paid by third parties in cash or through bank accounts

not belonging to Respondent No. 1 Company. Though Respondent No. 1

Company maintained bank accounts with the Surat People's Co-Operative Bank,

the Sutex Co-Operative Bank and Cosmos Bank only, property tax for many of

the unsold plots to Surat Municipal Corporation had been paid through cheques

issued from other banks or in cash.

viii) The accounts of Respondent No 1 Company for the financial years 2013-

14 to 2016-17 did not show any payment of property tax to Surat Municipal

Corporation by Respondent No. 1 company. It is relevant to mention that

Respondent No. 1 company got its accounts for all these years 2013-14 to 2016-

17 audited by the Chartered Accountants by giving counter indemnity to the

chartered accountants who audited the accounts. On 21.08.2018, Company

Petition No. 36 of 2018 filed by the Respondents against the Appellant no. 1

Company Appeal (AT) No. 81 of 2021 8

herein came up for hearing before the National Company Law Tribunal,

Ahmedabad. The Appellants herein mentioned before the Tribunal about the

information acquired by them through personal visit, from the sub- registrar

office, Surat and from Surat Municipal Corporation through RTI about the

conversion/sale of Respondent No. 1 Company's plots by Respondent no. 2 and

others to unknown third parties without execution of sale deeds and without

accounting any receipts based on the evidence of property tax for the so-called

unsold plots being paid by third parties to Surat Municipal Corporation and

sought time for filing a counter petition/recall application against the

Respondents. The NCLT, Ahmedabad gave time for the appellants for the same.

ix) Further, the Appellants herein filed the counter petition/recall application

i.e. I.A. No. 608 of 2019 in Company Petition No. 68 of 2017 seeking recall of the

order dated 23.11.2017 passed by the NCLT on the ground of fraud and

suppression of facts by the Respondents in Company Petition No 68 of 2017.

After hearing the parties, the Tribunal passed the order impugned (supra) which

led to filing of this Appeal.

3. The Ld. Counsel for the Appellant during the course of argument and in

his memo of appeal along with written submissions submitted that the

application for recall of order filed by Appellants is maintainable under Section

151 of CPC due to fraud and concealment of facts by Respondents before entire

course of litigation until Hon'ble Supreme Court. The adverse findings recorded

in paragraphs 27, 30, 34 and 43 of the NCLT order dated 23.11.2017 against

Appellant No. 1 clearly shows that the allegations in FIR (stayed by Hon'ble

Company Appeal (AT) No. 81 of 2021 9

Gujarat High Court on 24. 08. 2015) has been the main reason for the said order.

4. It is further submitted that the Respondents had sold off about 22 plots

during 2015 to 2018 to third parties without accounting the same in Respondent

No. 1's books of accounts. This is duly corroborated by property tax receipts

furnished by Surat Municipal Corporation under RTI against which Respondents

have no answer till date. The Respondents were under an obligation to disclose

correct facts and records before NCLT in CP 68 of 2017. The said Company

Petition came to be dismissed on 23.11.2017 only due to fraud and suppressions

of facts by Respondents. Although, the litigation before NCLT and up to the

Hon'ble Supreme Court, the Respondents have suppressed the fact of

conversion, misappropriation, misrepresentation and fraud perpetrated by them

in respect of assets of Respondent No. 1 company.

5. It is further submitted that on the ground of fraud, forgery, manipulation,

misrepresentation by Respondents, orders of NCLT and NCLAT deserve to be

recalled with the consequential relief to the Appellants. Reliance is placed, inter

alia, on the following judgements:

• MCD Vs Anil Gupta & others [2019 SCC Online Del 9627] (paras 14 &

25) • Hillcrest Realty Sdn Versus Hotel Queen Road Private Limited [2009 SCC online Del 4336] (paragraph 43 onwards and para 59) • A. V. Papayya Sastry And Others Versus Government Of AP And Others [(2007) 4 SCC 221] (paragraphs 24 to 40) • Angelo Brothers Ltd Versus Bennett, Coleman & Co Ltd [2017 SCC Online Cal 768] (paragraph 38)

Company Appeal (AT) No. 81 of 2021 10

6. It is further submitted that there is inherent jurisdiction in this Appellate

Tribunal to set aside NCLT Order/Recall its own order. Sub-section (2) of Section

424 provides for powers of civil court under CPC, 1908 for summoning and

enforcing attendance of any person, examination on oath, requiring the discovery

and production of documents, receiving evidence on affidavits etc on NCLAT.

Sub-section (3) of Section 424 states that any order of the Appellate Tribunal

may be enforced in the same manner as if it were a decree made by a court.

Further, Sub-section (4) of Section 424 states that all proceedings before the

Appellate Tribunal shall be deemed to be judicial proceedings and the Appellate

Tribunal shall be deemed to be civil court for the purposes of Section 195 of the

CRPC, 1973. The said Section 195 deals with filing of forged / false affidavits

containing false evidence or false statements before a court of law.

7. Further, Rules 11, 73, 74 & 77 of the NCLAT Rules, 2016 contain

provisions to effectuate and enforce the aforementioned provisions in Section

424 by the NCLAT. In other words, the NCLAT is vested with powers identical to

the civil court in respect of affidavits filed before it. The final orders of NCLAT are

executable like a decree passed by a court of law under the CPC. The Appellant

relies upon Judgment passed by the Hon'ble Supreme Court in "Indian Bank Vs.

Satyam Fibres India Private Limited (1996) 5 SCC 550 at paragraph 20" wherein

it was held that authorities, be they constitutional, statutory or administrative,

(and particularly those who have to decide a lis) possess the power to recall their

judgments or orders if they are obtained by fraud as fraud and justice never

dwell together. Further, in paragraph 32 of the said judgment, the Hon'ble

Company Appeal (AT) No. 81 of 2021 11

Supreme Court held that the principles regarding fraud and forgery will apply

not only to courts of law but also to statutory tribunals which are conferred

power to record evidence by applying certain provisions of the CPC including the

power to enforce attendance of the witnesses and are also given the power to

receive evidence on affidavits.

8. Further, relied on judgment reported in 2009 SCC Online Delhi 4336

[affirmed by the Hon'ble Supreme Court in (2009) 8 SCC 709], the Hon'ble Delhi

High Court held that "playing a fraud upon the court would vitiate the proceedings

and if a decision is obtained by playing a fraud upon any Court (including a

superior Court), it can be set aside by any Court (including an inferior Court). The

strict understanding of the law by the Courts hardly leaves any choice to a litigant

to decide what is relevant and what is not for the purposes of disclosure of a fact

or a document.". The judgment by the Hon'ble Delhi High Court came to be

delivered in respect of a lis under the Companies Act, 1956. In view of the above,

this Appellate Tribunal has inherent powers for allowing the appeal of the

Appellants to set aside the order dated 23.11.2017 passed by the Tribunal as

well as for recalling its own earlier order dated 23.05.2018 due to

suppression/misrepresentation, fraud by Respondents inspite of Hon'ble

Supreme Court having upheld the orders of NCLAT/NCLT.

9. The Ld. Counsel for the Respondent during the course of arguments and

in his Reply along with written submissions submitted that in this Appeal, the

Appellants seeks to recall an order passed in CP 68 of 2017 by the NCLT on

23.11.2017 and upheld by this Appellate Tribunal vide order dated 23.05.2018

Company Appeal (AT) No. 81 of 2021 12

and the same order was further upheld by Hon'ble Supreme Court vide order

dated 10.08.2018. Accordingly, the order which Appellants wishes to recall has

already reached to its finality with order of Hon'ble Supreme Court, hence no

other lower court of the country can recall this order. This is well established law

and practice under judicial process hence this appeal deserves to be dismissed

with exemplary cost. In this regard, the Respondents relied on a judgment

passed by the Hon'ble High Court of Mumbai, Nagpur Bench in PIL NO. 115 of

2017 with Writ Petition No. 5845 of 2018 (at page 10 to 28 of the Reply) wherein

exemplary cost of Rupees Fifty Lakhs was imposed. Therefore, such misuse of

process of law with an appeal of 12 volumes (2400 pages) is a lame to misguide

the judiciary and deserves exemplary cost.

10. It is further submitted that submissions in this appeal are also not less

than perjury. The Appellant claims that he made an RTI application on

14/08/2018 with the Surat Municipal Corporation and he came to know about

some facts and filed this petition for revocation of order reached to finality before

Hon'ble NCLT. However, in Appeal of 12 volumes, the Appellant never produced

a copy of the RTI application before the NCLT and this Appellate Tribunal. On

raising of this question about copy of RTI application by Respondents in their

reply, the Appellant filed so called RTI application in rejoinder to reply at pages

16 and 17 of the Rejoinder. RTI is a very well-known and familiar law to everyone

and this Appellate Tribunal also very much aware about the format of an

application under RTI and the so called RTI application placed at pages 16 and

17 of the Rejoinder is not an application under RTI hence to make such

Company Appeal (AT) No. 81 of 2021 13

submissions absolutely contrary to facts and law are not less than perjury and

for this reason also Appellant deserves strict punishment and the instant Appeal

must be dismissed with exemplary cost.

11. It is admitted that the Appellant has committed fraud with the Respondent

No.1 company and was under jail for about two months and the Hon'ble High

Court has given conditional bail to the Appellant. In this Order (at page 894 to

896, Vol.-VI of the Appeal) the conditions of this bail order is "not to try to tamper

with or pressurize the prosecution witnesses or complainant in any manner"

(Respondent No. 1 company was complainant and such false litigations are

nothing but contempt of Hon'ble High Court order). Considering the high headed

attitude of the Appellants and creating hurdles by initiating false and unwanted

litigations against the Respondent No.1 company, its shareholders and also

against the buyers of plot of land from the Respondent No. 1 company and its

statutory auditors as well, all the shareholders have unanimously passed a

resolution to buy out the Appellant's 8% shares under section 236 of the

Companies Act, at appropriate value as may be determined by an independent

valuer to be appointed by the NCLT. The CP No. 36 of 2018 was filed by the

Respondents on 07.03.2018 and further 05.09.2018 in this matter also filed

counter petition in the form of an IA against this petition unmbered MA 1 in CP

36 of 2018 on 19.10.2019 and similar voluminous records of 2000 plus pages

are placed in MA 1 in CP 36 of 2018. After couple of hearings, the Appellant felt

that his exit from the company as shareholder of the company is final with

outcome of CP 36 of 2018 and that is why with the sole intention to delay justice

Company Appeal (AT) No. 81 of 2021 14

in CP 36 of 2018. All these false and frivolous multiple litigations are being

created and on the ground of pending this matter, the Appellant keep taking

adjournment in CP 36 of 2018.

12. After hearing the parties and going through the pleadings made on behalf

of the parties, we observe that the order dated 23.11.2017 which was passed by

the Tribunal attained finality by the order of the Hon'ble Supreme Court and

thereafter, recall application for recalling the order dated 23.11.2017 was filed

by the Appellants is not tenable in the eye of law. We also observe that the

Appellants are trying to reagitate the matter afresh. Keeping in view the

aforenoted facts, we do not find any merit to interfere with the order impugned

passed by the NCLT. The impugned order dated 26.04.2021 passed by the

National Company Law Tribunal, Ahmedabad Bench, Ahmedabad in IA 608 of

2019 in C.P. No. 68/NCLT/AHM/2017 is hereby affirmed. The instant Appeal is

hereby dismissed. No order as to costs.

13. Registry to upload the Judgment on the website of this Appellate Tribunal

and send the copy of this Judgment to the National Company Law Tribunal,

(Ahmedabad Bench, Ahmedabad), forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Mr. Shreesha Merla] Member (Technical)

New Delhi 23rd February, 2023 R. Nath.

Company Appeal (AT) No. 81 of 2021