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2011 DIGILAW 191 (KAR)

Velu B. Pethi v. Kayesess Constructions P. Ltd.

2011-02-17

A.S.PACHHAPURE

body2011
JUDGMENT A.S. Pachhapure, J.—The Petitioner has sought for the restoration of the name of Respondent No. 1 company on the register of Respondent No. 4. 2. The facts relevant for the purpose of this petition are as under: Respondent No. 1 company is a private limited company having its registered office at Malleswaram, Bangalore and under the memorandum and articles of association, it is the main object of the company to carry on all or any of the business of designing, planning and/or construction of apartments, bungalows, residential houses, housing colonies, factories, public buildings, multistoreyed buildings, schools, colleges, community halls, shopping complexes or to carry on business as civil, mechanical, electrical, water supply and sanitary contracts, architects, designers, etc. The Petitioner has produced the copy of the memorandum and articles of association at annexure A. 3. The land bearing S. No. 172 presently numbered as S. No. 190 measuring 2 acres 10 guntas was an agricultural land situated within the village limits of Kethamaranahalli, Yeshwanthapura Hobli, Bangalore North Taluk and it was granted by the Government of Karnataka in favour of one Sri Muniaravappa who made an application before the Deputy Commissioner, Bangalore District for grant of permission for conversion of the land to an extent of 974.24 sq. mts., and the Deputy Commissioner vide his order dated November 4, 1987, granted the permission sought for. 4. On March 24, 1990, the said Muniaravappa and his son executed a irrevocable general power of attorney in favour of K.G. Krishna Murthy the father of Respondent No. 2 empowering him to deal with the above said lands to an extent of 863.95 sq. mts., and the said power of attorney sold the said land to Respondent No. 1 company under the sale deed dated October 31, 1990 and the copy of the sale deed has been produced by the Petitioner at annexure E. 5. The said land owner subsequently through his GPA holder, Respondent No. 2 sold an area of 186 ft. x 50 ft. in S. No. 190 of the said village under the registered sale deed dated April 22, 1991. The residential sites were formed in the land acquired by Respondent No. 1 and amongst the 9 sites formed in the said land, the Petitioner purchased the site at S. No. 4 in the petition under the sale deed dated February 20, 1995, for a consideration of Rs. The residential sites were formed in the land acquired by Respondent No. 1 and amongst the 9 sites formed in the said land, the Petitioner purchased the site at S. No. 4 in the petition under the sale deed dated February 20, 1995, for a consideration of Rs. 3,50,000 on payment of the stamp duty of Rs. 49,040. The copies of the sale deeds executed by the company in favour of different persons related to the Petitioner have been produced by the Petitioners at annexure G1 to G8. 6. In the registered partition dated January 24, 2007, amongst the family members of the Petitioner, the Petitioner was allotted the above said site towards his share in the joint family properties and thereby, the Petitioner claims to be the absolute owner of the site referred to supra. 7. In the year 1964, the then City Improvement Trust Board, i.e., the Bangalore Development Authority notified the above said land in S. No. 172 for acquisition for the purpose of formation of West of Chord Road, 2nd Stage, 2nd Phase Layout (Near Nandini Talkies) and for a play ground and providing civic amenities. The preliminary notification was issued on March 2, 1964, in the Karnataka Gazette and the final notification dated November 18, 1967, was also published in the Karnataka Gazette. The then City Improvement Trust Board had taken possession of the land acquired on August 16, 1972. Later Respondent No. 1 along with the predecessor in title filed the suit bearing O.S. No. 1305 of 1990 in the City Civil Court seeking a decree of permanent injunction against the Bangalore Development Authority from demolishing the house in the property sold by the owner of the land bearing S. No. 172 through the GPA holder and the said suit came to be dismissed. The copy of the judgment has been produced by the Petitioner at annexure J.O.S. No. 6960 of 1991 was also filed for the same purpose and the said suit also came to be dismissed. 8. Thereafter, Respondent No. 1 company along with its predecessors-in-title, i.e., Muniaravappa and Sri M. Lingaraju jointly filed the suit bearing O.S. No. 4373 of 1995 against the State of Karnataka and the officers of the Bangalore Development Authority seeking declaration that the acquisition proceedings initiated acquiring the lands bearing S. No. 172 as null and void and not binding upon the Plaintiffs. The said suit also came to be dismissed after hearing the parties. 9. The Petitioner was unaware of the acquisition proceedings initiated by the Bangalore Development Authority and Respondent No. 1 never brought to the notice of the Petitioner about the said acquisition. In the circumstances, it is claimed by the Petitioner that the directors of Respondent No. 1 company induced the Petitioner to purchase the property by fraud and misrepresentation by concealing the fact of acquisition. 10. On October 25, 2008, the officers of the Bangalore Development Authority pulled out the fence erected and demolished the construction and in these circumstances, the Petitioner claims that he is entitled to recover the loan due to him by fraudulent act of the company and its directors. 11. Respondent No. 1 company closed the business by use of the scheme registered by the Register of Companies and Respondents Nos. 2 and 3 actively participated in the affairs of Respondent No. 1 and being the directors of the company, the Petitioner claims that they are also liable to make good the loss sustained by the Petitioner. In view of the closure of the company, the name of Respondent No. 1 was deleted from the register of Respondent No. 4 and it is in these circumstances, the Petitioner claims that as he intends to take action against the Respondents for recovery of the loss, has filed the present petition seeking the restoration of the name of the company in the register. 12. Respondents Nos. 1 and 2 have filed their objection statement denying the allegations made and they contend that the petition is not maintainable as there is defective cause title and that the company has not been represented by the directors and further, that this Court has no jurisdiction to entertain the present petition for restoration of the name. So also, it is the contention that the Petitioner is not a creditor and therefore, he does not come within the purview of the provisions of Section 560(6) of the Companies Act, 1956 (hereinafter called as "the Act" for short). So also, it is the contention that the share capital of the company is less than Rs. 1 lakh and therefore, this Court has no jurisdiction to entertain and try the petition. On these grounds, he has sought for the dismissal of the petition. 13. So also, it is the contention that the share capital of the company is less than Rs. 1 lakh and therefore, this Court has no jurisdiction to entertain and try the petition. On these grounds, he has sought for the dismissal of the petition. 13. Respondent No. 4 has not objected to the grant of the relief subject to certain conditions. 14. In the circumstances, I have heard learned Counsel for the Petitioner and also counsel for Respondents Nos. 1, 2 and 4. 15. Learned Counsel for Respondents Nos. 1 and 2 contended that the Petitioner has no locus standi to file this petition on the ground that he is neither a member nor creditor as provided in Sub-section (6) of Section 560 of the Companies Act, 1956, nor this Court has jurisdiction to entertain the petition as it is the Tribunal which has got the jurisdiction to pass such orders and furthermore, that there is defective cause title and the company is not represented by the directors. 16. It is not in dispute that the Petitioner is one of the persons to whom the site was allotted and ultimately, the nine sites allotted by the company were in the possession of the Petitioner and when the land on which the sites have been formed have been acquired by the City Improvement Trust Board long back, the company had no title to sell the said sites either to the Petitioner or any other person. In the circumstances, the sale deed executed by the company in favour of the Petitioner and others have not conveyed any title and thereby, the Petitioner is entitled to claim the loss occasioned due to the sale transaction. On this aspect of the matter, learned Counsel for the Petitioner has placed reliance on the decision of the Chancery Division reported In re : Harvest Lane Motor Bodies Ltd. (1968) 2 All ER 1012 wherein, the word "creditor" used in Section 353(6) of the Companies Act, 1948 was taken into consideration and it was held that it includes a person who has a claim for the loss sustained at the instance of the company. In the circumstances, the contention that the Petitioner does not fall within the category of the "creditor" cannot be accepted. 17. In the circumstances, the contention that the Petitioner does not fall within the category of the "creditor" cannot be accepted. 17. So far as the defective cause title is concerned, though in the cause title it is so mentioned, the fact that the company was represented by the directors has been explained in paragraph 3 of the plaint wherein it is stated that Respondent No. 1 company is represented by its directors Respondents Nos. 2 and 3. Hence, even the contention, that there is defective cause title is not sufficient to discard the claim made by the Petitioner. 18. Though the word "Tribunal" has been used under Section 560(6) of the Act, it is relevant to note that the substitution is made by an amendment to the provisions of the Act (amended by Act No. 11 of 2003), but no notification has been yet issued by the Government giving effect to the amended provisions. Thereby, though in the provisions of Section 560(6) of the Act, the word "Tribunal" is used, it is to be considered as the court which is under the Act till the amended Act is given effect to. 19. Though it is contended that the share capital of the first Respondent-company is less than Rs. 1 lakh, as could be seen from the memorandum of association of Respondent No. 1 company, in Clause 3(a) it is clearly mentioned that the share capital of the company is Rs. 25,00,000 divided into 2,500 "A" class equity shares of Rs. 100 each and Rs. 2,250 "B" class equity shares of Rs. 1,000 each. In the circumstances, it was not necessary for the Petitioner to approach the District Court and the petition filed before this Court is legal and valid. 20. As the company became defunct in the year 2004, the Petitioner has acquired a right to recover the damages in view of the transaction of sale in respect of the property of which the first Respondent had no title. In the circumstances, as the Petitioner intends to initiate the proceedings against the company for the recovery of damages, it is just and proper to restore the name of Respondent No. 1 company in the register maintained by the Registrar of Companies. Hence, the petition is allowed. In the circumstances, as the Petitioner intends to initiate the proceedings against the company for the recovery of damages, it is just and proper to restore the name of Respondent No. 1 company in the register maintained by the Registrar of Companies. Hence, the petition is allowed. The name of Respondent No. 1 company M/s. Kayesess Constructions P. Ltd., is ordered to be restored in the register of Respondent No. 4, i.e., the Registrar of Companies with immediate effect.