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2015 DIGILAW 947 (CAL)

Rahul Heights Limited v. State of West Bengal

2015-12-04

NADIRA PATHERYA

body2015
JUDGMENT : Patherya, J. By this application the petitioner seeks cancellation of order dated 6th May, 2013 and memo dated 10th May, 2013 so also a direction on the registering authorities to accept the documents presented by the petitioner for registration purposes. According to the petitioner by the said two memos/orders mentioned above based on the proceedings in the Saradha Group of Companies registration of documents of a number of companies has been stopped, thereby, transfer of title has been hindered. As the owner of properties the said is an infringement of rights guaranteed to the petitioner to deal with its properties under Article 300A of the Constitution of India. By virtue of the said two orders the petitioners have been deprived of dealing with properties which otherwise it would have been entitled to do. The said orders/memos have no force of law and at best are executive instructions which seeks to deprive the petitioners of its guaranteed rights without any recourse. In 1976 the Rajasthan Legislature brought in a similar legislation. Section 22A of the Registration Act was struck down by the Rajasthan High Court being opposed to public policy and the said decision of the Rajasthan High Court was also upheld by the Supreme Court of India. The reported decision in this regard is AIR 2001 Rajasthan 127 which has been affirmed by the Supreme Court of India in (2005) 12 SCC 77. The reported decision is based on the principle of the said legislation being against public policy as by virtue thereof the authority was given exclusive powers to decide on the issue and liable to be misused and, therefore, struck down on the ground of it being violative of Article 14 of the Constitution of India. The Registration Act does not control transfer. The memo dated 10th May, 2013 is no legislation in the eye of law. The State has assumed to itself powers and refused registration. The said memo dated 10th May, 2013 is de hors the legislative competence of the State. As the order dated 10th May, 2013 is without legislative competence exercisable by the State, the said document can at best be treated as a department circular or an executive instruction and is bad as the executive powers and legislative authority are co-extensive as per Article 162 of the Constitution of India. As the order dated 10th May, 2013 is without legislative competence exercisable by the State, the said document can at best be treated as a department circular or an executive instruction and is bad as the executive powers and legislative authority are co-extensive as per Article 162 of the Constitution of India. The preamble of the 1908 Act empowers registration of documents and in no way prohibits registration of documents. As the legislature is not competent to prevent or stop registration, the same cannot also not be done by issuance of executive instruction. Schedule 7 List-II sets out the State list and List-III sets out the Concurrent list. Therefore, for lack of authority by the State the memo dated 10th May, 2013 is a mere instruction to the officers of the State and is not an executive order. In 1981 in West Bengal Section 22A was introduced which is not in operation. This has been admitted in the affidavit filed by the State. As an executive instruction the direction given is not permissible, therefore, the memo dated 10th May, 2013 being beyond legislative competence of the legislature be quashed and set aside. In opposing the said application Counsel for the State respondent submits that it is on the basis of the order passed in W.P.12197 (W) of 2013 and to protect the interest of the investors in Ponzi Schemes that the orders dated 6th May, 2013 and 10th May, 2013 were issued. A list of companies indulging in Ponzi Schemes was placed before the Lok Sabha on 14th March, 2013. The name of Rahul Heights Limited was included in the said list at Serial No.52. The list placed before the Rajya Sabha produced by the petitioner is not exhaustive and does not in any way exclude the name of the petitioner. It is only on the basis of the information placed before the Parliament that the State thought it fit to stop registration of properties of companies indulging in Ponzi Schemes. It is true that the power has not been exercised under the Registration Act but, it has been exercised to prevent misuse and abuse so also dealing with properties intended to deprive the poor investors. It is true that the power has not been exercised under the Registration Act but, it has been exercised to prevent misuse and abuse so also dealing with properties intended to deprive the poor investors. The memo dated 6th May, 2013 was issued on the basis of an order passed in W.P.12197 (W) of 2013 and with the approval of the Government and the Finance Department the Inspector General of Registration and Commissioner of Stamp Revenue, West Bengal were restrained from registering transfer of properties by the companies mentioned. It is at the behest of the Central Government that the memo dated 10th May, 2013 has been issued. Non-inclusion of the name of the petitioner in the list placed before the Rajya Sabha cannot entitle it to deal with its properties or register the same. Therefore, this application merits no order. Any order passed be to safeguard the interest of the investors. Counsel for the intervener investor submits that several complaints have been filed by the investors against the company. The first of the complaints was filed on 16th July, 2014 when an FIR was registered. Summons was also issued against the company and its directors, orders have also been passed under Section 102 Cr.P.C. for freezing of accounts of the petitioner and its directors. To Summons issued the directors of the petitioner no.1 have not answered nor have they appeared before the relevant forum. By seeking orders from this Court the petitioner no.1 and its directors are seeking to bypass the orders and summons issued by the forum in Assam. Therefore, any order passed will defeat the complaints filed and investigation initiated and no order be passed. Counsel for SEBI submits that on the basis of complaints, investigation has been undertaken and is at an advance stage and within 45 days report will be filed. Therefore, no order be passed. In reply Counsel for the petitioner states that the points raised by it has not been answered by any of the parties including the State respondent. The power of the State to issue the said instruction is without authority and as it appears from the opposition filed has been issued at the behest of the Central Government and tantamount to following the instruction blindly. Therefore, orders be passed as sought. The power of the State to issue the said instruction is without authority and as it appears from the opposition filed has been issued at the behest of the Central Government and tantamount to following the instruction blindly. Therefore, orders be passed as sought. Having considered the submissions of the parties the order dated 6th May, 2013 was issued in the light of the order dated 25th April, 2013 passed in W.P.12197 (W) of 2013 by the Calcutta High Court. The said order was restricted only to the Saradha Group of Companies. Subsequently, on 10th May, 2013 a restriction was sought to be imposed on 73 companies, against which complaints had been received. A list of the 73 companies was received by the Finance Department from the Corporate Affairs Ministry and based thereon, the memo dated 10th May, 2013 was issued. The said memo is in the nature of an Executive instruction which the authorities were entitled to issue. Article 162 of the Constitution of India entitles the executive to exercise power over matters in respect of which the legislature has power to make laws. The subjects in respect of which the legislature is empowered to make laws is listed in List-II of Schedule 7 of the Constitution of India. Besides the said list, the State legislature is competent to also make laws on subjects contained in List-III, namely, Concurrent List and it is only when legislation is passed both by the Centre and State in respect of a subject contained in the Concurrent List that State legislation must yield to the Central legislation. In the instant case there is no such Central legislation and, therefore, the question of yielding does not arise. The Concurrent List (List-III) empowers the State legislature to enact laws with regard to Transfer of Property, other than agricultural land; registration of deeds and documents (Entry 6). It is by virtue of the said Entry that the State respondents were entitled to issue the Executive instructions dated 6th May, 2013 and 10th May, 2013. The reason for issuance of the executive instructions as has emerged from the affidavit filed by the State is to protect the interest of the unwary investors who had invested sums in the Companies indulging in Ponzi schemes. The name of the petitioner also featured in the list submitted to the Lok Sabha on 14th March, 2013. The reason for issuance of the executive instructions as has emerged from the affidavit filed by the State is to protect the interest of the unwary investors who had invested sums in the Companies indulging in Ponzi schemes. The name of the petitioner also featured in the list submitted to the Lok Sabha on 14th March, 2013. As the issuance of the letter dated 6th May, 2013 and 10th May, 2013 cannot be faulted, this application merits no order and is dismissed.