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2006 DIGILAW 1405 (DEL)

AROOSHI ENTERPRISES PVT. LTD v. RAHUL BUTALIA

2006-08-22

PRADEEP NANDRAJOG

body2006
PRADEEP NANDRAJOG, J. ( 1 ) THE present order disposes of plaintiff s application IA No. 3025/2005. The application has been filed under Order 39 Rule 1 and 2 CPC praying that till disposal of the suit, the defendants should be restrained from transferring, selling, creating a charge or parting with possession of land and building bearing No. 37, Sector-18, Maruti Industrial Area, Gurgaon ; 70, Sector-18, Maruti Industrial Area, Gurgaon and B-26, Gulmohar Park, new Delh. ( 2 ) AN ex-parte ad-interim injunction was granted in favour of the plaintiff on 20th April, 2005. ( 3 ) VIDE order dated 18. 4. 2006, disposing of IA No. 6971/2005, the ex-parte order dated 20th April, 2005 was modified, in that, property bearing no. B-26, Gulmohar Park, New Delhi was excluded from the purview of the injunction granted. ( 4 ) THUS, in respect of the 2 properties at the Industrial Estate in gurgaon, injunction operates. ( 5 ) CASE of the plaintiff in support of the injunction is that with effect from 28. 9. 1996, defendant No. 1 was appointed as a Director of the plaintiff and with effect from 3. 5. 1995, defendant No. 2 was appointed as the director. Whereas defendant No. 1 had resigned from the Board on 16. 12. 2004, defendant No. 2 is stated to have continued to be a Director. ( 6 ) IT is pleaded that defendants 1 and 2 were in complete control of the affairs of the plaintiff and siphoned of huge amounts of the plaintiff. These amounts were illegally diverted to defendants 3 and 4 which are companies incorporated and controlled by defendants 1 and 2. ( 7 ) IT is further stated that defendants 3 and 4 carry on similar business as that of the plaintiff, being manufacture of toys. ( 8 ) IT is pleaded in para 5 of the plaint that in the year 2001-2002, chemicals worth Rs. 41. 77 lacs were allegedly purchased by the plaintiff from the defendants 3 and 4. Account books were falsifying. No chemical was received. ( 9 ) IN para 6 of the plaint it is stated that between April, 2001 to november, 2001 semi-finished goods in sum of Rs. 76. 89 lacs were shown as purchased by the plaintiff from defendant No. 3 by and under 10 separate purchase vouchers. Account books were falsifying. No chemical was received. ( 9 ) IN para 6 of the plaint it is stated that between April, 2001 to november, 2001 semi-finished goods in sum of Rs. 76. 89 lacs were shown as purchased by the plaintiff from defendant No. 3 by and under 10 separate purchase vouchers. But, in the inward register at the gate of the factory of the plaintiff, no such entry of goods has been recorded. It is further stated that in the stock register of the plaintiff, said semi-finished goods have not been entered into. In para 7 of the plaint it is stated that the plaintiff had been buying goods from defendant No. 3 at a price higher than the market price. ( 10 ) IT is further pleaded that during the period April, 2003 to November, 2004 plaintiff paid to defendants 3 and 4 huge amounts for purchasing latex. In relation to the goods manufactured by the plaintiff it is stated that latex consumed would be approximately 562. 498 metric tonnes less than what has been shown to have been purchased from defendants 3 and 4. It is stated that the value of the said quantity of latex is about 245. 59 lacs. ( 11 ) IT is further stated that during the period defendants 1 and 2 remained in control of the affairs of the plaintiff, salary and wages of employees of defendant No. 3 approximating Rs. 23 lacs were paid from the accounts of the plaintiff. ( 12 ) A summary of the amounts defalcated has been set out in para 14. Amount shown as defalcated is Rs. 521. 08 lacs. ( 13 ) SUIT seeks recovery of Rs. 5,21,08,000/- against the defendants. ( 14 ) IN her written statement, defendant No. 2 has denied that she was incharge of the day-to-day affairs of the plaintiff. It has been pleaded by her that the operations of the plaintiff were being carried out under the overall supervision of defendant No. 1. It has been specifically pleaded by defendant no. 2 as under :- "in any event the affairs of the plaintiff company were being run by the defendant No. 1 with the team under his control of the production, finance etc. which reported to him. It has been specifically pleaded by defendant no. 2 as under :- "in any event the affairs of the plaintiff company were being run by the defendant No. 1 with the team under his control of the production, finance etc. which reported to him. " ( 15 ) IT is further pleaded that the affairs of defendant No. 4 are being managed exclusively by defendant No. 1. ( 16 ) QUA payments made to defendant No. 3 for goods stated by the plaintiff not received by the plaintiff, defendant No. 2 has pleaded that the fact that receipt of goods was not shown in the record of the plaintiff, is neither here nor there in as much as the goods were made as per the specifications of the plaintiff. In respect of the controversy pertaining to latex pleaded by the plaintiff, it is stated by said defendant that no money was transmitted or changed hands pertaining to latex. It is further pleaded that entire activities of defendant No. 3 were from a rented premises where production was being done almost exclusively for the plaintiff. Qua payment of salaries to the employees of defendant No. 3 from the funds of the plaintiff, defendant No. 2 has stated as under:- "as a matter of fact, the answering defendant states and submits that the payment of salaries by plaintiff by staff of defendant No. 3 was because its staff was assisting plaintiff in production of the goods. " ( 17 ) DEFENDANT No. 1 has pleaded that the plaintiff was incorporated in february, 1995 with Atul Punj and Ajay Bahl as the Promoter Directors. ( 18 ) I may note that Ajay Bahl is none other than the husband of defendant No. 2. ( 19 ) IT is further stated by defendant No. 1 that he joined as a Director at the asking of Atul Pun. That the entire affairs of the plaintiff company were managed by Atul Pun. ( 20 ) ON the incorporation of defendant No. 3, defendant No. 1 has pleaded that it was incorporated in the year 1996. That he and defendant no. 2 became Directors of defendant No. 3 in the year 2000. That defendant no. 4 was incorporated in April, 2001 with defendants 1 and 2 as its promoter directors. But, he states that defendant No. 4 was incorporated at the instance of Mr. Atul Pun. That he and defendant no. 2 became Directors of defendant No. 3 in the year 2000. That defendant no. 4 was incorporated in April, 2001 with defendants 1 and 2 as its promoter directors. But, he states that defendant No. 4 was incorporated at the instance of Mr. Atul Pun. ( 21 ) DEFENDANT No. 1 has further pleaded that the affairs of the plaintiff as also defendants 3 and 4 always remained under the control and supervision of Mr. Atul Pun. ( 22 ) IT is further pleaded that at the asking of Atul Punj, defendant No. 1 resigned from all the companies. e. plaintiff and defendants 3 and 4. ( 23 ) IN respect of the material allegations in the plaint, defendant No. 1 has admitted interconnection in the business dealings between plaintiff and defendant No. 3. He has stated that this was at the instance of Atul Punj and defendant No. 2. He has admitted that the salary of the employees of defendant No. 3 was being debited to the account of the plaintiff. He has admitted that goods received from defendant No. 3 were not shown as entered into in the records of the plaintiff but has justified the same by stating that the goods were exported and money realised was created to the account of the plaintiff. ( 24 ) FROM the pleadings of the parties, it is evident that the defendants have admitted close interconnectivity between affairs of defendants 3 and 4 and the plaintiff. Pleadings of the parties further show that the same set of persons incorporated the plaintiff and defendants 3 and 4. ( 25 ) CASE of the plaintiff is primarily based on a report of an auditor who after scrutinising and auditing the records of the plaintiff company has given a tentative report showing defalcation of huge amounts. ( 26 ) IT was urged by learned counsel for the defendants that the said report shows that it is tentative and is a preliminary report and therefore cannot be relied upon. On merits, counsel for the defendants urged that the 2 properties in the Industrial Estate at Gurgaon have been purchased by defendants 3 and 4 and the plaintiff cannot seek any injunction in respect of said 2 properties. ( 27 ) AT this stage I am not to evaluate evidence. On merits, counsel for the defendants urged that the 2 properties in the Industrial Estate at Gurgaon have been purchased by defendants 3 and 4 and the plaintiff cannot seek any injunction in respect of said 2 properties. ( 27 ) AT this stage I am not to evaluate evidence. Suffice would it be to note that grant of injunction would depend upon whether plaintiff has made out a prime facie case, who would suffers an irreparable injury and where does the balance of convenience lie. ( 28 ) PRIMA facie case has to adjudged in the context of whether a bona fide dispute has been brought before the court which requires a trial. Plaintiff has not to establish a foolproof case. ( 29 ) THE broad contours of the pleadings show that the defendants have to offer explanations in respect of the transactions referred to by the plaintiff and as of today it cannot be said that justification of the finances received in the account of defendants 3 and 4 from the accounts of the plaintiff do not require a scrutiny. Further, admission that employees of defendant No. 3 were being paid from the account of the plaintiff shows that those who were managing the affairs of the plaintiff were giving a go by to standard accounting procedures for the reason defendant No. 3 is a separate corporate entity. Pleadings of the defendants show an intermingling of the funds of the plaintiff with those of defendants 3 and 4. ( 30 ) PRIMA facie, a serious triable issue arises for consideration on the pleadings of the parties, being whether certain transactions were bogus and were intended to siphon away the funds of the plaintiff and what is the effect of employees of defendant No. 3 being paid from the accounts of the plaintiff. ( 31 ) INDEED, injury would be caused to the plaintiff if defendants 3 and 4 managed to sell of their land and building. If plaintiff ultimately succeeds, corporate veil would have to be lifted qua defendants 3 and 4. Balance of convenience requires that the assets created by defendants 3 and 4 are saved. ( 31 ) INDEED, injury would be caused to the plaintiff if defendants 3 and 4 managed to sell of their land and building. If plaintiff ultimately succeeds, corporate veil would have to be lifted qua defendants 3 and 4. Balance of convenience requires that the assets created by defendants 3 and 4 are saved. However, I feel that no useful purpose would be served in injuncting said defendants from disposing of its machinery for the reason such an order would flood the present suit with applications in future in as much as machines may, with passage of time, require replacement and upgradation of machinery may be required as technological advances. To restrain defendants 3 and 4 from not disposing of their machinery would mean that the existing machinery would have to be preserved till disposal of the suit which I feel may take anything between 6-10 years for disposal, keeping in view the nature of the controversy. ( 32 ) BESIDES, value of land and building would be sufficient to secure the interest of the plaintiff, should plaintiff ultimately succeed. ( 33 ) I accordingly dispose of IA No. 3025/2005 by restraining defendants 3 and 4 from selling, alienating or parting with possession of their land and building at premises No. 37, Sector-18, Maruti Industrial Area, Gurgaon and premises No. 70, Sector-18, Maruti Industrial Area, Gurgaon.