Judgment:
ORDER
Nooty Ramamohana Rao, J.
1. This is an application taken out by 3 individuals Viz: Sri Nasayam Mohammed Feroz, S/o Mohd. Farook, Sri Pasapoina Nageswara Rao, S/o China Venkata Swamy and Sri Arimandla Veera Reddy, S/o Rami Reddy, seeking directions for releasing the property bearing D. No. 12-25-12, Ganeshwar Rao Street (Sivalyam Street), Kothapet, Guntur from the custody/possession of the Official Liquidator attached to this Court.
2. M/s. Vijetha Agro Farms India Limited is a company incorporated under the provisions of the Indian Companies Act having its registered office at Vijetha Complex, Sivalayam street, Kothapet, Guntur. One of the principal objectives for which the company came to be established was to develop agro farms and agro based industries and products. It has mobilized funds by way of collection of deposits for the purpose of developing agro farms at various places. The company also acquired an open plot admeasuring 813 sq. yards through four different sale deeds bearing Nos. 7848/1996, 7967/1996, 7546/1996 and 7561/1996 for valuable consideration. On the said open plot of land, a multi-storied building has been constructed where the registered office of the company is located. It bears Municipal Door No. 12-25-12, Sivalyam Street, at Kothapet locality of Guntur city.
3. According to the applicants, since the company has become nearly insolvent and with a view to tide over its financial distress, through one of its Directors viz., Sri D.R.K.Singh, sold the property comprising of 813 sq. yards of site together with the building standing thereon for a total consideration of Rs. 50 lakhs. According to the applicants, they paid a sum of Rs. 49,75,000/- towards advance and part payment of sale consideration and the balance amount of Rs. 25,000/- was agreed to be received at the time of registration. It is their case that inspite of repeatedly informing the said Director and the company about the readiness and willingness of the applicants to pay up the balance amount of Rs. 25,000/-, the receipt of the said balance amount of Rs. 25,000/- and the consequential execution of the sale deed are delayed on one pretext or the other. Vexed by the indifference exhibited by the company and its Director Sri D.R.K.Singh, the applicants appeared to have filed a civil suit OS No. 20 of 2005 on the file of the III Addl. District Judge at Guntur seeking specific performance of the agreement of sale. Immediately, a compromise memo has been filed before the court and consequently the matter has been referred to the Lok Adalat which passed a decree on 28.6.2005 duly recording the compromise between the parties. In terms of the compromise decree, the balance amount of Rs. 25,000/- has been accepted and a regular sale deed has been executed on 14.7.2005. However, the Sub-Registrar, Guntur before whom the said sale deed has been presented for registration has kept the document pending for want of payment of the deficit stamp duty, as according to the Sub-Registrar, the market value of the property is far in excess of the sale consideration amount shown in the deed and hence the stamp duty and registration fee has to be computed and paid on the basis of the market value.
4. It is further alleged that for purchasing the property, the applicants have availed loans from different persons and since the interest payable thereon is mounting, they have considered it appropriate to alienate the said property and accordingly entered into an agreement of sale on 2nd July 2007 with one Rev. KVK Rao, R/o Vanasthalipuram, Hyderabad, who paid 60% of the sale consideration amount. It is alleged that the possession of the property has not been handed over as the sale deed has been kept pending by the Sub-Registrar. In the meantime, they have come to know that CA No. 128 of 2005 came to be filed before this Court by some of the depositors of the company to whom the company has committed default in repaying their deposit amount seeking winding up of the company. It appears that the said company petition has been moved on 14.12.2005 and ultimately the winding up order came to be made by this Court on 4.12.2006. Pursuant to the order of winding up, the Official Liquidator attached to this Court has been appointed as liquidator of the company and in the process of taking over the possession of various assets of the company under liquidation, the Official Liquidator taken possession of the asset where the registered office of the company is located on 4.4.2007. It was also further pointed out that the criminal complaints lodged against the company are not being investigated properly and correctly and hence WP No. 3445 of 2004 has been instituted by some of the depositors in this Court and the said writ petition came to be disposed of on 28.12.2004 directing the Crime Investigation Department of Police (CID Police) to act upon the complaints lodged by the depositors of the company and take appropriate action in the matter. However, by the time the State Police could finalise the entire action, the property in question has already been sold to the applicants herein. Hence, they moved the present application seeking the property to be released from the custody of the Official Liquidator, as the title over the property has been transferred by the company in favour of the Applicants by way of sale deed executed on 14.7.2005.
5. It is not in dispute that the company M/s. Vijetha Agro Farms (India) Limited, Guntur has collected huge sums of money by way of deposits from the general public and utilizing the money so collected, various assets have been acquired by it which are essentially in the form of agricultural lands, house sites etc. One such asset acquired during the year 1996, was the vacant site situated in Guntur city whereon the super structure have been constructed for housing the registered office of the company. The built up area of the building is approximately 29,000 sq. ft and conservatively if the construction cost is put at Rs. 500/- per sq. ft, the value of the super structure alone would be approximately Rs. 1,45,00,000/-. This does not include the value for the land of more than 800 sq. yards. Very conservatively put the value of the land in Guntur city in Kothapet locality in the year 2005 would be at least Rs. 2,500/- per sq yard and hence the land value would not be less than Rs. 2 crores. Thus, by the worst estimate, the asset would not have been anything less than Rs. 3.5 crores worth. But, very strangely and most inexplicably, this asset was offered for sale for the peanut value of Rs. 50 lakhs. Far stranger, is the modus operandi adopted in the matter. Nandyal town is far removed from Guntur city and is located in Kurnool district. If the company and its Directors are passing through any financial distress, requiring any immediate assistance, an attempt would have been made to ensure that wider publicity is given to the deal to secure as nearer a possible price for the market value. Every attempt would have certainly been made to secure a value as nearer to the available market value and even assuming that distress sales would not be fetching the true market value even in such circumstances, the asset could not have been possibly offered for sale for anything less than Rs. 2.5 crores. No publicity was ever issued by the company or by its Directors for the intended sale of this asset. No authorization has ever been issued by the company in favour of any of its officials or Directors either to negotiate or enter into any transaction of sale of its registered office premises and execute any deed on it's behalf as is required under Section 48 of the Companies Act. Further, there is no resolution passed by the Board of Directors of the company, in accordance with the provisions contained in Section 291 of the Companies Act, for undertaking the sale of any of the assets of the company. The General Body of the Company has never been informed of the proposed sale of this particular asset of the Company. Further, no company which has gone public and collected huge sums of money from the general public, would at the first instane, think of offering for sale it's registered office premises, without selling off any other asset. And still not expect a huge backlash of protests! No information was forthcoming as to how the applicants who are such young persons and are aged approximately around 25 years, 30 years and 35 years in the year 2005, came to know of the impending sale of the asset of this company. No circumstances have ever been explained as to how Sri D.R.K.Singh, said to be the Director of the company, came to know about the financial wherewithal of such young persons situated in Nandyal to buy this property and offered them for sale this asset. Nowhere it was explained as to how the applicants and their friends got the property valued before entering into a transaction. Why they refrained carefully from making any further inquiries about the property is truly intriguing. No information was forthcoming as to how they could pool up a huge sum of Rs. 49,75,000/- in cash at one go and then produce these wads of currency before Sri D.R.K.Singh. Far more curious and strange and wholly inexplicable is their conduct of failing to pool up a pittance of Rs. 25,000/- to complete the sale transaction on the same day itself and instead preferred to put off the transaction to a future date. What prevented them to raise the further sum of Rs. 25,000/- and also complete the sale transaction by securing the execution of sale deed is indeed stranger than fiction.
6. Obviously, all the three applicants herein and their other three accomplices (who are the plaintiffs in the civil suit) have devised a method to use the platform of the courts, to perfect an impermissible act of theirs. No agreement of sale has been entered into by them with the company. It was not produced, at any rate before this Court. In spite of providing an opportunity, they have not produced material in that regard. They have made available a copy of the plaint filed by them before the civil court in the additional material papers filed into the court pursuant to the orders passed on 23.02.3009. The plaint fully describes all the six plaintiffs. The 1st applicant herein is incidentally, the 1st plaintiff. He has been described to be 35 years old in the plaint, whereas in the present application which is moved in 2007, he has been described as 27 years old. In the sale deed said to have been executed by the company on 14.7.2005, he is described to be 25 years old. The plaint described them as business people whereas an attempt is now made to describe them as landed gentry. Since this Court directed the income tax returns for the relevant period to be made available, so as to have an idea about their financial capacity to enter into a transaction of sale of this magnitude, as they asserted that an amount of Rs. 49,75,000/- has been paid at one go and an agreement was also executed on 2.5.2002 by the company. If the entire sale consideration amount has been shelled down barring paltry amount of Rs. 25,000/-, the normal human conduct would not have permitted the parties to keep quiet without taking further action in the matter promptly and most expeditiously. The suit was instituted before the District Court, Guntur on 16.3.2005, that is nearly 3 years after the transaction has been entered into. The plaint schedule describes the suit schedule property as an extent of 402 sq. yards with it's boundaries specified therein together with the building standing thereon. Whereas the open site purchased by the company in 1996 is 813 square yards. The defendant's address has been mentioned in the suit as under:
M/s. Vijetha Agro Farms (India) Ltd., rep. By its Chairman and Managing Director, Bondili Ramakrishna Singh, S/o Vital Singh, Aged : About 48 years, C/o Vijetha Publications, Mangalagiri Road, Guntur, Guntur District.
7. Strangely, the defendant being a company instead of suing it at it's registered office, as is required in terms of Section 51 of the Companies Act, it has been preferred to be sued at a different address. A memo is said to have been filed before the District Court, Guntur, that both parties have proposed to settle the matter before the Lok Adalat and hence prayed to refer the matter to the Lok Adalat. All the six plaintiffs have signed and on behalf of the defendant Mr. D.R.K.Singh, said to be the chairman and Managing Director of the company, signed and so did the two learned Advocates on either side. Care has been taken to see to it that no date is mentioned there in the memo. However, a decree came to be passed by the Lok Adalat, Guntur, on 28.6.2005. The terms of the compromise which are very tersely worded are to the following effect:
1. Court fee paid by the plaintiff shall be returned to the plaintiff by the court before which the proceedings have been pending under Section 21(1) r/w Section 25 of the Legal Services Authority Act, 1987 and it shall not form part of the costs payable by the defendants.
2. The suit may be decreed.
3. The balance of sale consideration is paid by the plaintiffs and received by the defendant.
4. The defendant is agreed to execute registered sale deed in respect of the suit schedule property on or before 15.7.2005.
5. If the defendant fails to execute the document within the above mentioned period, plaintiffs are at liberty to execute the award through court process.
8. Accordingly, the sale deed is said to have been executed on 14.7.2005, a day earlier to the last date set for in the terms of compromise. In less than 4 months time, from the date the civil suit is instituted, the sale deed came to be executed.
9. The whole of this exercise smacks of fraud from the very beginning. If the defendant has coolly resisted the sale transaction for nearly three years i.e., from May, 2002 till March, 2005, there is no good reason why Sri D.R.K. Singh suddenly surfaced before the District Court and proposed to settle the matter amicably with the plaintiffs. Further, the terms of compromise have also not indicated what benefit or advantage which the defendant was to get from entering into such a compromise, notwithstanding the time lag. The court fee paid by the plaintiffs is also agreed to be refunded. That will be to the benefit of the plaintiffs. For a compromise to be trustworthy there should not only be good faith but it must accompany honest intentions. The suit is prayed to be decreed i.e., to the utmost benefit of the plaintiffs. The defendant agreed to execute and register the sale deed on or before 15.7.2005 which is also for the benefit of the plaintiffs. If for any reason, defendant failed to execute, liberty was accorded to the plaintiffs to get the sale deed executed through the court's process. That would also enure to the benefit of the plaintiffs. The only term in the compromise in favour of the defendant was the factum that he received the balance sale consideration amount of Rs. 25,000/- from the plaintiffs, without bothering to specify the date on which the said amount is said to have been received and the mode of such receipt. According to the plaintiffs, it is the defendant and its Chairman and Managing Director who has resisted to receive this balance sale consideration of Rs. 25,000/-. What brought about such a radical change of heart in him to suddenly agree to receive the Rs. 25,000/- is remaining elusive. It is therefore crystal clear that the plaintiffs and the defendant acting through Sri D.R.K.Singh has played fraud on the court and they used this process for perfecting it. The entire act has been put together to possible defeat the winding up process, for which an application has been moved in this Court. The whole act from the start to finish has the tell tale signs and marks of fraud. Clandestine acts always carry the foul smell of suspicion.
10. It becomes crystal clear that fraud has been palyed by merely looking at the sale deed said to have been executed on 14.7.2005 pursuant to the decree passed by the Lok Adalat on 28.6.2005. The sale deed has been executed in favour of Sri Nasayam Mohammed Feroz, S/o Mohd. Farook, Sri Pasapoina Nageswara Rao, S/o China Venkata Swamy and Sri Arimandla Veera Reddy, S/o Rami Reddy. They are plaintiff Nos. 1, 2 and 5 in the civil suit OS No. 20 of 2005. Plaintiff Nos. 3, 4 and 6 are now said to have dropped out of this sale transaction. No reasons are forthcoming as to why so immediately after a compromise decree has been entered into on 28.6.2005, they should loose their patience by not waiting for a couple of more weeks for the sale deed to be executed in their favour. No reasons are forthcoming as to how the amount of sale consideration, paid up by those three individuals initially, was reconciled. It was asserted that they raised loans initially to pool up the sale consideration. When they realized that the debt burden is mounting day by day, they sold off this very property to Rev. K.V.K. Rao of Hyderabad. However, now in the additional material papers certificates from the Mandal Revenue Officer are produced to show that they were oozing with excessive cash yielded by their Horticulture ! Was it not said that 'dolosus versatur in generalibus' - a person intending to deceive deals in general terms.
11. Tricksters are on the prowl in the society. They will not hesitate to do all that is necessary for securing a ring of authenticity and acceptability for every deceitful action of theirs. If a sale deed for a very expensive immoveable property is got executed pursuant to a decree passed by a civil court, it is assumed that such transactions will automatically acquire the ring of credibility around them. Little do such people realize that in a suit wherein upon contest and after full fledged trial on every issue at stake, the same is decided in favour of the plaintiffs and a specific performance is ordered by a court, as a follow up measure, then it will undoubtedly carry a ring of authenticity around it. Not every attempt made to beat the clock and see to it that a valuable property is knocked down, irrespective of the fact whether the consideration paid for is adequate or not and that the means employed are fair and not foul, would matter a great deal. In the instant case, the applicants have failed to demonstrate their financial capacity to have pooled up such a huge sum of Rs. 49,75,000/- at one go, to pay to the respondent in cash in the year 2002. It passes one's comprehension that they have failed to pool up from all their resources a meager Rs. 25,000/- for the transaction to be over on the same day. The affairs of the company have been adversely reported in the Press ever since 2004 is a matter of common knowledge in Guntur city. Hundreds and thousands of complaints have been lodged with the police not only at Guntur, but at various other places in the State by the depositors alleging fraud and misrepresentation indulged in by the company. These depositors have been duped of their monies. Hence, this mode was devised by the Applicants to knock off a valuable asset of the Company.
12. This Court has already intervened in the matter in the year 2004 itself by directing the CID of the Police to act promptly on the complaints lodged against the company and its Directors. Therefore, to beat all these circumstances, the above transaction has been engineered and a sale deed has been got executed on 14.7.2005. There is no whisper of any authorization issued by the company in favour of Sri D.R.K. Singh to enter into a compromise or enter into a transaction of sale at the first instance with the plaintiffs/applicants. No such agreement can be enforced, even it it is entered into with the sanction of the Judge at the trial of the proceedings to which it related. [Keir .v. Leeman 6 Q.B.308; R.V. Blackmore 14 Q.B.544].
13. Properties of the companies are not liable to be sold like general merchandise items across the shelves. The poor attempt of camouflage made by all the parties is visible with the fact that no entries are found anywhere in the books of account of the company about receipt of Rs. 49,75,000/-. This apart, it passes one's comprehension as to how such huge sums of money are preferred to be parted in cash instead of through commonly known secured instruments like cheques or demand drafts. It is not as if that Nandyal town does not have any banking facilities. After all, one of India's Prime Ministers has been elected to the Parliament from this very constituency.
14. Fraud vitiates every transaction. No rights can ever flow to a party from a fraudulent transaction. Long years ago dealing with somewhat similar situation in S.P. Chengalvaraya Naidu v. Jagannath : AIR1994SC853 , this is what the Supreme Court has said:
(1) 'fraud-AVOIDS all judicial acts, ecclesiastical or temporal' observed Chief Justice Edward Coke of England about three centuries ago. It is the settled proposition of law that a judgment or decree obtained by playing fraud on the court is a nullity and non est in the eyes of law. Such a judgment / decree -- by the first court or by the highest court - has to be treated as a nullity by every court, whether superior or inferior. It can be challenged in any court even in collateral proceedings.
(6) FINALLY, the High Court held a under:
the principle of his decision governs the instant case. At the worst the plaintiff is guilty of fraud in having falsely alleged, at the time when he filed the suit for partition, he had subsisting interest in the property though he had already executed Exhibit B-15. Even so that would not amount to extrinsic fraud because that is a matter which could well have been traversed and established to be false by the appellant by adducing the necessary evidence. The preliminary decree in the partition suit necesarily involves an adjudication though impliedly that the plaintiff has a subsisting Interest in the property.(7) THE High Court, in our view, fell into patent error. The short question before the High Court was whether in the facts and circumstances of this case, Jagannath obtained the preliminary decree by playing fraud on the court. The High Court, however, went haywire and made observations which are wholly perverse. We do not agree with the High Court that 'there is no legal duty cast upon the plaintiff to come to Court with a true case and prove it by true evidence'. The principle of 'finality of litigation' cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants. The courts of law are meant for imparting justice between the parties. One who comes to the court, must come with clean hands. We are constrained to say that more often than not, process of the court is being abused. Property-grabbers, tax-evaders, bank-loan-dodgers and other unscrupulous persons from all walks of life find the court process a convenient lever to retain the, illegal-gains indefinitely. We have no hesitation to say that a person whose case is based on falsehood, has no right to approach the Court. He can be summarily thrown out at any stage of the litigation.
15. When an opportunity has been provided to the applicants to demonstrate their financial wherewithal to pool up such a huge sum of Rs. 49,75,000/- in the additional material papers filed, material has been placed in the form of pattedar passbooks and certificates issued by the revenue authorities that commercial crops were raised in the lands owned by the applicants and that they are deriving huge sums of money therefrom. These certificates issued by the Tahsildar are only needed to be looked at to be disbelieved. They are so contradictory in terms and content. When these contradictions are brought to the notice of the learned Counsel, Sri A. Sanjeev Kumar, realizing the difficult situation brought about, he has urged this Court to fix up a reasonable market value for the property and then direct the applicants to pay up the balance amount in favour of the company so as to regularize the sale transaction. Learned Counsel has submitted that since the applicants herein have already entered into a transaction of sale relating to this very property with Rev. K.V.K. Rao of Hyderabad on 2.7.2007 for a total sale consideration amount of Rs. 90 lakhs and they have already received Rs. 50 lakhs as advance, the balance money would be paid to the company, in case this Court comes to the conclusion that the consideration paid by the applicants is hopelessly under valued.
16. I am afraid that I cannot accede to any of these requests made by the learned Counsel for the applicants. A wrong doer ought not to be permitted to make a profit out of his own wrong (Lord Hatherlay in Jegon ..v.. Vivian L.R.6Ch.App.742 at 761).The entire transaction is vitiated by fraud played by them on the District Court as well as the Lok Adalat at Guntur. One Sri D.R.K. Singh on behalf of the respondent company has joined hands with them. What was the authority in the hands of the said individual vis--vis the company under liquidation is anybody's guess.
17. Since no right or interest of title can ever pass in favour of the beneficiary of the fraud and further no action can be maintained which is founded in fraud, I declare that the decree passed by the Lok Adalat pursuant to a compromise entered into by and between the parties therein in civil suit OS No. 20 of 2005 on the file of the III Addl. District Judge at Guntur as a nullity. Consequently, no rights of any kind would ever pass to the hands of the present applicants vis--vis the property in question owned and belonging to the company. A word of caution is needed to be sounded here and now. With the ultimate objective of securing speedier justice to the genuine litigant public, the Legal Services Authorities Act, 1987 has been enacted. Section 20(1)(ii) of the said Act specifically points out that if the court is satisfied that the matter is an appropriate one to be taken cognizance of by the Lok Adalat, then the Court shall refer the case to the Lok Adalat. Hence, it presupposes that a serious consideration is spared to find out that by no trick of pleading, the matter is sought to be taken out of the purview of the court. Similarly, Sub-section (4) of Section 20 mandates that the Lok Adalat shall be guided by the principles of justice, equity, fair play and other legal principles. These basic principles of the decision making process cannot be compromised as what is intended by the Act is to promote justice, even where the parties seek to enter into a compromise. A serious consideration is required to be bestowed by the Lok Adalat, particularly, when all the powers of a Civil Court are conferred on it, under Section 22 of the Act. The present case is, perhaps, an eye-opener.
18. The company application is therefore dismissed. But, however, without costs.