Case: Ghanshyam Sarda Vs. Sashikant Jha, Director, M/s. JK Jute Mills Co. Ltd. &amp; Others

2. The aforesaid Civil Appeals had challenged the judgment and order dated 06.01.2014 passed by the High Court of Gauhati in FAO No.10 of 2013, Writ Petition No.4303 of 2013 and Writ Petition No.6286 of 2013 and were disposed of by this Court vide its Judgment dated 13.11.2014, (2015) 1 SCC 298.   The facts leading to the filing of those appeals and connected matters are dealt with in said Judgment dated 13.11.2014. It is alleged in the present contempt petitions that in violation of the Order of 08.05.2014, which was passed during the pendency of the aforesaid Appeals, the assets owned by the Company, namely, J.K. Jute Mills Company Ltd. (hereinafter referred to as the Company) at Saifganj, Katihar, Bihar spread across 1.6 acres of land (Katihar property, for short) were sold vide Conveyance Deed dated 02.07.2014 and consequently the persons arrayed as contemnors interfered with due administration of justice. It is prayed that the contemnors be punished for disobeying the Order of 08.05.2014 and at the same time the Conveyance Deed dated 02.07.2014 alienating Katihar property be declared null and void3. The Company had filed Reference No.149 of 1994 before the Board for Industrial and Financial Reconstruction (the BIFR for short) under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 (Act for short), pursuant to which, various steps for revival of the Company were being considered. By order dated 17.12.2008 the BIFR had directed ...The Company would not encumber/alienate/lease/sale any property without specific prior approval of the Board. In the proceedings dated 26.08.2009, the BIFR had constituted Assets Sale Committee (ASC for short) in respect of properties of the Company including Katihar property. The proceedings of ASC dated 08.11.2012 of which Shri R.N. Lahoti, CEO of the Company was also a member show that the sale of Katihar property was engaging the attention of ASC4. The proceedings of the BIFR dated 07.02.2013 show that in compliance of the earlier directions, the Operating Agency was in the process of finalizing a Draft Rehabilitation Scheme (DRS for short) and in furtherance of the directions of sale of certain assets, notices were already sent to the Company, secured creditors and State of Bihar to nominate their representatives in ASC. The proceedings further show that the Operating Agency by letter dated 29.01.2013 had requested the BIFR to grant permission to proceed further for sale of assets of the Company situated in Bihar. The next proceedings of the BIFR dated 18.02.2013 indicate that the Operating Agency had got the assets valued and had sent notices to all parties to nominate their representatives in the ASC5. While the matter stood thus, Auditors Report dated 15.02.2013 for the period ending 31.12.2012 stated that the Net Worth of the Company had become positive. It was also mentioned in the Directors Report dated 19.02.2013 that the Net Worth of the Company had now turned positive. Around this time, the BIFR vide its Order dated 26.02.2013 had formulated DRS for the revival of the Company. On 28.02.2013 four advertisements were issued in prominent newspapers by the Operating Agency inviting Bids for sale of properties of the Company including Katihar property. The Reserve Price for Katihar property was L 354.99 Lakhs. The advertisement stated that the Bid documents could be obtained, inter alia, from S.K. Jha of M/S J.K. Jute Mills Co. Ltd, 70 Golf Links, New Delhi 1100036. When the matter was thus being considered for finalization of DRS and for sale of assets of the Company, in the proceedings of the BIFR dated 04.04.2013 it was submitted on behalf of the Company that the Net Worth of the Company having turned positive, BIFR no longer retained jurisdiction over the Company. The BIFR observed that as per Annual Balance Sheet of the Company as on 31.03.2012 the Net worth of the Company was L 5.71 Crores and the accumulated losses were L 36.23 crores and it would like to satisfy itself about the Balance Sheet as at 31.12.2012. The BIFR passed following directions:4.13. Having considered the submissions made in the hearing, materials on record, the Bench issued the following directions:(i) The Company to submit certified copy of its ABS as on2 along with all relevant papers and documents in support of its net worth within one week from today with copy to IDBI (OA) and all parties concerned along with documentary evidence;(ii) ASC would go ahead as per its schedule and confirmation of sale, if any, will take place upon the approval of DRS on, with the consent of the Bench(iii) The Bench fixed the next date of hearing on3 at 11.30 a.m. for considering the submission of the Company that its net worth has turned positive as on2 and also hear MA No.162/BC of 2012 on the said date7. On 16.04.2013 meeting of ASC was held but Shri. R.N. Lahoti CEO of the Company did not attend. The meeting took note of the letter dated 16.04.20013 from the Company signed by Shri S.K. Jha, Director that their representative would not take part in the ASC meeting as the Net worth of the Company having turned positive, it was no more covered under the Act. The proceedings of the BIFR dated 16.04.2013 disclose that the BIFR had observed that manipulation of accounts had been alleged against the Company and the BIFR would examine the same and enquire whether the Net Worth of the Company had turned positive or not8. At this stage, various proceedings including those at Gauhati were instituted, as detailed in the Judgment of this Court dated 13.11.2014. In Title Suit No.166 of 2013, Civil Court at Kamroop, Gauhati by an interim order dated 13.05.2013 restrained the defendants therein including the BIFR from proceeding with Reference No.149 of 1994. This Order and subsequent proceedings taken up in Gauhati High Court led to the filing of Special Leave Petitions giving rise to aforementioned Civil Appeal Nos.10221 of 2014 and 10223 of 2014 and other connected matters in which this Court passed the Order of 08.05.20149. During the pendency of the aforesaid Civil Appeals in this Court, aforementioned Contempt Petition Nos.338 of 2014 and 375 of 2014 were filed alleging alienation of Katihar property vide Conveyance Deed dated 02.07.2014 in violation of the Order of 08.05.2014. Contempt Petition (C) No.338 of 2014 was taken as the lead petition and the basic allegations about the involvement of various contemnors as detailed in paragraphs 4 and 7 to 14 in the contempt petition are to the following effect:4. That the Contemnor Nos.1 to 3 in conspiracy and collusion with other Contemnors, the particulars of which are given hereinafter have after 08.05.2014 sold away by executing a Registered Conveyance Deed dated 02.07.2014 capital assets of the Contemnor No.1 Company being the land, factory buildings etc. to one M/S. Thapar Herbs & Spices Pvt. Ltd. (Contemnor No.14 herein) through its Director Mr. Mrityunjay Kumar Singh, Contemnor No.17 herein (who is also the stooge and the employee of the Contemnor Nos.2 and 3); hence the present Petition.

Court's reasoning:
The submission of the alleged contemnors is that the conveyance deed was executed on 04.04.2013 on which date the entire consideration stood paid by the transferee and was credited to the account of the Company and as such the title passed in favour of the transferee well before the Order of 08.05.2014 and what was done on 02.07.2014 was a mere ministerial act. According to the alleged contemnors, the documents presented for registration in April 2013 were not accepted for want of adequate stamp and registration fees. This infirmity was removed and the documents were then presented for registration. In such circumstances the order of 08.05.2014 was not in any way violated by them17. The Order of 08.05.2014 had directed ....capital assets of the company shall not be disposed of without taking permission of this Court. The expression shall not be disposed in the context connotes action or process of sale of assets. Going by Section 54 of the Transfer of Property Act, 1882, transfer of any tangible immovable property of the value of Rupees hundred and upwards can be made only by a registered instrument. The expression `only in the Section is significant. The transfer comes into effect and becomes valid and effective only by a registered instrument. It is true that the document was sought to be registered in April, 2013 but the registration in question was duly effected only on 02.07.2014. In the eyes of law, it is this document registered on 02.07.2014 which alone effectuates transfer of interest in Katihar property in favour of the transferee. The transfer was thus effected on 02.07.2014 i.e. well after the Order of 08.05.201418. The document dated 04.04.2013 did not by itself create any interest nor did the title pass upon execution of such document on 04.04.2013 but it was only after the registration on 02.07.2014 that the title in Katihar property passed from the Company in favour of the transferee. The submission of the contemnors however, is that by virtue of Section 47 of the Registration Act, the document in question would operate from 04.04.2013. In our view, the principle embodied in Section 47 of the Registration Act is completely for different purposes. In so far as the issue of transfer is concerned, Section 54 of the Transfer of Property Act is the governing principle, which is quite clear. It is the date of registration of document which is crucial inasmuch as the transfer is effected and the title passes only upon registration. Viewed thus, it is clear that Katihar property was transferred in the teeth of the Order of 08.05.2014 and ex facie there has been violation of the Order passed by this Court. It is crucial to note that on 08.05.2014, the company had appeared on caveat before this Court and certainly had express knowledge about the Order of 08.05.2014. It was party to the proceedings and was bound by the order passed by this Court in every respect19. The submission on part of alleged Contemnor Nos.1,4,5,6,7 and 8 namely the Company and its directors/servants is that the document was executed by alleged Contemnor No.7 Sobhanand Jha in pursuance of the authority given to him by the Company way back on 06.02.2013. As on 06.02.2013, the company was definitely a sick company and the Reference was pending before the BIFR. Around that time the ASC was constituted which was considering sale of assets including Katihar property. It was only after the Auditors report dated 15.02.2013 that the Company started projecting that its net worth had become positive on which account it ceased to be governed under the provisions of the Act and was outside the jurisdiction of the BIFR. Though this Court rejected such submission in its judgment dated 13.11.2014, at this stage we are considering the bonafides and tenability of the assertions made by the alleged contemnors. There could not have been any occasion for the Company before 19.02.2013, even accepting the submission that it ceased to be a sick company as alleged, to enable the Company to execute an authority on 06.02.2013 in favour of alleged Contemnor No.7. That authorization is wholly defective and unsustainable. It is not the case of the alleged contemnors that after the adoption of the Auditors Report and Directors Report dated 19.02.2013 a decision was taken by the Company to sell or dispose of its Katihar property in pursuance of which due authorization was given to a competent person to execute the documents on behalf of the Company20. Further, the facts on record disclose that said Sobhanand Jha changed his name to R.S. Prabhakar on and with effect from 18.03.2013. However, the document mentioned his name as Sobhanand Jha which he signed as Sobhanand Jha on 04.04.2013. He tendered his resignation on 17.02.2014 as R.S. Prabhakar. Despite such resignation, he thereafter executed the document on 02.07.2014 in the name of Sobhanand Jha and signed as Sobhanand Jha. In any event of the matter as on 02.07.2014, the person was not a Director of the Company. He submitted that the Company had given him an authority way back on 06.02.2013 pursuant to which the document was executed on 04.04.2013 on which date the sale for all practical purposes stood completed and what remained was only a ministerial act which was done by him independently of the Company on 02.07.2014. It is on the basis of this submission that the Company as well as its Directors/servants namely alleged Contemnor Nos.4, 5, 6 and 8 seek to wriggle themselves out of any liability for violation of Order of 08.05.2014. If the order was passed on 08.05.2014 restraining any alienation of the capital assets of the Company, the Directors/servants of the company ought to have taken steps to inform alleged Contemnor No.7 to refrain from registering the document on 02.07.2014. Neither such steps were taken nor was the Court informed on 08.05.2014 about the document executed on 04.04.2013, in which event this Court could have passed appropriate Orders including restraint on registration. Similarly, if Sobhanand Jha, alleged Contemnor No.7 had resigned on 17.02.2014, he had no authority to register the document on behalf of the Company. In our view, the entire exercise was a clever device employed by the Company and its Directors, in that, first an authority in favour of a Director was created who then resigned as Director but continued to register the document on the basis of erstwhile authorization and at the same time the person having resigned could claim lack of knowledge of the Order of restraint passed by this Court. Their actions were deliberate and designed to flout the Order of 08.05.2014.The involvement of alleged Contemnor Nos.1,4,5,6,7 and 8 in the transfer the assets of the Company in the teeth of the Order of 08.05.2014 is thus apparent and clear21. We now turn to the involvement of those officials concerned with registration, who went ahead and registered the document on 02.07.2014 despite having been put to notice and served with a copy of the Order of 08.05.2014. Our attention has been invited to the opinion rendered by the office of the Advocate General, Bihar to the effect that even if there be any order passed by a civil court in connection with a private dispute between the parties, the registering authorities are bound to register a document presented for registration. This opinion was relied upon by the Government Advocate who then opined that the document in the present case could be registered. The request was allegedly made on 30.06.2014 and the opinion of the Government Advocate was promptly given on 01.07.2014. There is no register maintained diarizing the inward and outward letters and prima facie the entire theory appears to be suspicious and designed to confer a favour. However, since these are government servants, we grant them benefit of doubt and would only caution them. It is shocking that an order passed by this Court, in the face of the provisions of Article 142 of the Constitution, could be ignored or disregarded by the officials who went ahead and registered the document. However, we do not find sufficient grounds to invoke our Contempt Jurisdiction to punish them for violation of the Order of 08.05.201422. We now turn to the involvement of alleged Contemnor Nos.14, 15 and 16 who are the transferee Company and its Directors/servants. These alleged contemnors were neither parties to the proceedings pending in this Court in which Order of 08.05.2014 was passed nor is there any material to indicate that such order was ever served on them or brought to the notice of these alleged contemnors. The role played by alleged Contemnor No.17, however, stands on a different footing. The documents on record do show that he used to represent the Company and was also given authority to collect documents on behalf of the Company from the office of the BIFR. Further, on his own showing, he had gone ahead and registered the document not on the asking of the transferee. He had gone along with the Directors of the Company and on the directions of alleged Contemnor No.3. The knowledge about the passing of Order of 08.05.2014 to the Company and its Directors having been established, there is room for suspecting the involvement of alleged Contemnor No.17. But mere suspicion may not be enough and we give him benefit of doubt. Thus, none of the alleged Contemnor Nos.14 to 17 have been proved to be guilty of violation of Order of 08.05.201423. As regards the involvement of alleged Contemnor Nos.2 and 3, they were neither Directors nor Shareholders of the Company nor has it been shown that they have any stake or interest in the Transferee Company. It is undoubtedly true that alleged Contemnor No.17 in his affidavit stated that he used to work under the directions of alleged Contemnor Nos.2 and 3 and that the registration of the document on 02.07.2014 was done under the express directions and alleged Contemnor No.3. However, such a statement coming from a, in our view, is not sufficient to reach a conclusion about the involvement of alleged Contemnor No.3. Further, the documents pertaining to Writ Petition No.5670 (W) of 2016 pending in Calcutta High Court as well as the affidavit filed by Dinesh Sarda are also not conclusive enough. The criticism that such documents and the affidavit of Dinesh Sarda are conveniently brought on record, would also require assessment of facts. Thus, though there is room to suspect the involvement of said Contemnor Nos.2 and 3, the material on record is not conclusive enough to hold them guilty of violation of Order of 08.05.2015. We, therefore, close these proceedings as against them24. We now come to the crucial question as to the effect of transfer or alienation of Katihar property in violation of the Order of 08.05.2014. The law on the point is well settled in the decision of this Court in D.D.A. v. Skipper Construction Co. (P) Ltd., (1996) 4 SCC 622  that legal consequences of what has been done in breach of or in violation of the order of stay or injunction can be undone and the parties could be put back to the same position as they stood immediately prior to such order of stay or injunction25. In the present case the Company and its Directors/servants were certainly guilty of transgressing or violating the Order of 08.05.2014 but as found hereinabove, the transferee and its Directors/servants have not violated the Order of 08.05.2014. The transferee and its Directors/servants were neither parties to the proceedings nor were they served with the Order of 08.05.2014. In para 38 of the judgment of this Court dated 13.11.2014, this Court had found the transfer in favour of the transferee to be questionable and had relegated the matter to the BIFR to consider the matter in the light of directions contained in said para 38. In the circumstances, no further orders are called for invalidating the registration dated 02.07.2014. Further, according to the record the transferee had parted with full consideration way back on 04.04.2013. In the totality of these circumstances we do not think it appropriate to exercise our power to invalidate the effect of registration of the document on 02.07.2014.