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Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3765 OF 2016

Estate Officer UT Chandigarh & Ors. .. Appellants

Versus

M/s. Esys Information Technologies Pvt. Ltd. .. Respondent

J U D G M E N T

Arun Mishra, J.

1.The appeal has been preferred by the Estate Officer, Union Territory of

Chandigarh, aggrieved by the judgment and order passed by the High Court of

Punjab & Haryana at Chandigarh thereby setting aside the orders passed by the

Estate Officer, appellate and revisional authorities on 24.9.2008, 14.2.2011 and

14.12.2012 respectively, thereby resuming the plot which was allotted to the

respondent. Facts in short indicate that in the year 2002, Chandigarh

Administration notified the rules called Allotment of Small Campus Site in

Chandigarh Information Services Park, Rules, 2002 (hereinafter referred to as

‘the Rules’). Rule 9 of the Rules provided that transfer of the campus site by the

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allottee shall not be allowed for a period of 10 years from the date of allotment

or till all dues are fully paid up whichever is later. Similar condition was

incorporated in the allotment letter dated 1.6.2006 by which 6 acres of land was

allotted to the respondents. It was necessary to make the construction within 3

years from the date of allotment.

2.On 2.1.2008 it came to the notice of the Director, Information Technology

that the respondent company namely M/s. Esys Information Technologies Pvt.

Ltd., Singapore had transferred a major portion of shares to other company

namely, M/s. Esys Global Holdings, Dubai, without informing the appellant or

seeking necessary permission as provided in Rule 9 and clause 15 of the

allotment letter. Consequently, Director, IT, sought following clarifications from

the respondent on 2.1.2008: (i) what is the business plan of the company for its

activities; (ii) what are the business activities of M/s. Esys Information

Technologies Ltd. from the campus site; (iii) what was the holding structure of

the shareholding of the company at the time of making request for allotment;

(iv) what was the holding structure of the company at the time of allotment; and

(v) what is the shareholding structure of the company at present. Reply by the

respondent was not satisfactory, as such show cause notice was issued on

18.1.2008 by the Estate Officer as to why due to violation of Rule 9 of the Rules

and clause 15 of the allotment letter, action be not taken and allotment be

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cancelled and further why whole or part of the premium, EDC calculated till

date of cancellation be not forfeited. The Estate Officer by order dated 24.9.2008

cancelled the allotment and ordered resumption of the site and ordered to forfeit

10% of the total premium, interest earned and other dues payable in respect of

the site. Aggrieved by the same, the respondent preferred an appeal under

section 10(1) of the Capital of Punjab (Development and Regulation) Act, 1952.

The appeal was dismissed vide order dated 14.2.2011 passed by the Chief

Administrative Officer, UT Chandigarh. The respondent preferred a revision

before the Advisor to Administrator, UT Chandigarh. Same had been dismissed

vide order dated 24.9.2008. It is pertinent to mention that the affidavit filed by

Mr. Vikas Goel in the High Court of Singapore was placed on record and was

referred to in the order passed by the revisional authority. Before the appellate

authority, it was argued that the allottee company had transferred a major

portion of shareholding changing its control to another company i.e. Esys Global

Holdings, Dubai which in turn sold its stake to Teledata Informatics Ltd., a

Chennai based company.

3.The High Court by the impugned judgment and order has allowed the writ

petition. This Court while entertaining the special leave petition had passed an

order on 16.7.2015 directing the respondent to file a counter affidavit containing

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certain information specified in the order. Following order was passed by this

Court on 16.7.2015 :

“Heard.

Issue notice.

The respondent has appeared on caveat. The

respondent-company shall file a counter affidavit within six

weeks from today. Rajoinder affidavit, if any, be filed by the

petitioner within two weeks thereafter. Counter affidavit shall

apart from answering the averments and contentions raised in

the special leave petition also specifically state whether the

share-holding in the allottee company has been transferred to

any other company and if so which is the consideration paid

for such transfer. The affidavit shall further indicate whether

the transferee of such holding has, in turn, further transferred

the shares to Teledata Informatics Ltd., Chennai, if so, the

consideration for such transfer shall also be indicated.

Audited balance sheets of the allottee company from the year

2007 onwards and those of the transferee company, shall be

filed along with the counter affidavit.

Status quo, as it exists today, shall be maintained by

the parties, pending further orders from this Court.”

4.In short, in the counter affidavit of the respondent, the shareholding

pattern has been given as on 1.6.2006, 31.3.2007, 3.5.2007 and it is not disputed

that M/s. Esys Information Technologies Pvt. Ltd., Singapore had transferred

1,97,55,188 shares to Esys Global Holdings, Dubai owned by one Niraj Goel. It

is further stated in the counter filed by the respondent that EZY Global Holding

FZE, Dubai has not further transferred the shares to Teledata Informatics Ltd.,

Chennai. It is also stated that on 29.11.2006 a shareholder agreement was

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executed between Mr. Vikas Goel, M/s. Esys Information Technologies Pvt. Ltd.

Singapore and M/s. Teledata Informatics Ltd., Chennai. This agreement could

not be implemented due to the fraud perpetrated upon Mr. Goel and M/s. Esys

Information Technologies Pte., Singapore by M/s. Teledata Informatics.

Following are the cases pending inter se parties :

“(i) Vikas Goel and Rainforest v. Teledata Informatics

and Others – Arbitration in SIAC Singapore.

(ii) Vikas Goel and Rainforest v. Ramachandran

(Teledata CEO) and Others in New York.

(iii) Esys India v. Teledata – Perjury Application in

Chennai.

(iv) Esys India v. Teledata – Winding up application in

Chennai.

(v) Baytech and Teledata v. Vikas Goel and Rainforest

– BVI.”

In the counter affidavit, it is contended that Rule 9 has not been

technically violated by the respondent. Though, the respondent’s shareholding

pattern has undergone a change after allotment but it could not be a ground for

the resumption of the allotment. Approximately one year out of three years has

remained for raising the construction and before that order of resumption had

been passed. The allotment was not speculative transaction. It was not intended

to get unjust enrichment from the allotment at a concessional rate. The

respondent fully satisfied the eligibility criteria. Office has been rented,

furnishing cost has been incurred, Managers were relocated from Singapore and

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Delhi. Esys has relocated its key global functions to Chandigarh. There was

delay of 5 to 6 months in handing over possession of the campus site. The

respondent was entitled to mortgage the site for raising loan by way of trading

security. In this regard, permission was sought but was not given. The site was

resumed on 24.9.2008 before the expiry of 3 years from the date of allotment.

5.Along with the rejoinder, the appellant has filed two affidavits filed by

Mr. Vikas Goel in the High Court of Republic of Singapore in Suit

No.854/2006/H. It is submitted that the holding company was the Singapore

Company and Dubai and India based companies were its subsidiary companies.

The allotment was made in favour of M/s. Esys Information Technologies. M/s.

Esys, Singapore could not have transferred assets as per clause 15 of the

allotment order for a period of ten years. The stake of Dubai company by virtue

of 95% shares transfer has raised to 98%. M/s. Esys Global Holdings Ltd.,

Dubai further sold these stakes to Teledata, a Chennai based company. Facts

stated in Affidavit dated 2.7.2008 of Mr. Vikas Goel which was part of the

record of the Estate Officer have been concealed in spite of the categorical order

dated 16.7.2015 passed by this Court. The way in which the transaction has

been made is a transfer which is not permissible as per rules and conditions of

allotment letter. In fact there is transfer of plot from one company to the other

company. The respondent is using the land for increasing valuation of assets

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and thereby improving financial worth. The holding company and its

subsidiaries are two distinct legal entities. This Court should lift the veil so as to

unearth mala fide, dishonest and fraudulent design of the respondent. Teledata is

claiming to have acquired M/s. Esys Singapore and showing the plot in question

as its asset.

6.It was submitted on behalf of the appellant that transfer without

permission was not permissible as per Rule 9 and clause 15 of the allotment

letter for ten years. It is not a case which is covered by Condition No.15-b of the

allotment letter. It is not only a case of transfer to Dubai company but transfer of

assets to Teledata, a Chennai based IT company. Affidavit of Mr. Vikas Goel

mentions various facts though it was filed before the Estate Officer as well as

the DIT Office. However, in spite of the direction issued by this Court the

respondent has not filed it nor has stated the facts mentioned in the same in the

counter affidavit and wrong averments have been made. Reliance has been

placed by the appellant on certain portions of the affidavit of Mr. Vikas Goel

indicating that there had been transfer of assets of subsidiary in India. The actual

facts regarding transfer of shares to Teledata have been suppressed. Teledata had

published unaudited results mentioning that Teledata along with its subsidiary is

setting up a six acre TBO facility in Rajeev Gandhi Information Technology

Park in Chandigarh. The affidavit filed by Mr. Vikas Goel in Singapore court

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indicates that he has signed an agreement to sell 51% stake to Teledata. Vikas

Goel wanted to dupe Teledata and therefore surreptitiously transferred shares to

Esys Global Holding, Dubai. It is a clear cut violation of the rules. Esys India

had ceased its operations after 2010 as all its businesses were closed down and

all the employees were laid off. The company has no business transaction, no

employees, never deposited any PF nor filed sales-tax returns. It is a clear case

of transfer of property. Transfer means transfer in any form whatsoever and

howsoever styled. A prayer was made by respondent on 24.9.2007 to change the

zoning plan. The prayer was declined on 25.10.2007 and a letter dated

25.10.2007 was issued. No construction had been made till the cancellation. No

step had been taken to raise the construction also. Thus, their intention was

never to start the construction.

7.It was submitted on behalf of the respondent that there is no violation of

clause 15 of the allotment letter. The allottee remains the same. Clause 15 is not

attracted as transfer of site is not to the other entity. It is not a case of allottee

company being merged with other company or a case of split. The allottee

company was subsidiary of M/s. Esys Singapore. The shares have been

transferred to M/s. Ezy Global Holding, Dubai, company owned by Mr. Niraj

Goel, brother of Mr. Vikas Goel. There is no occasion to lift the corporate veil in

the instant case. There was no transfer of shares of the allottee by M/s. Ezy

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Dubai to M/s. Teledata, Chennai. The respondent is a reputed company and has

not indulged in a speculative land deal.

8.Clause 15 of the allotment letter reads as follows :

“(a) The transfer of Campus Site by the allottee shall not be

allowed for a period of 10 years from the date of

allotment, or till all dues are full paid, whichever is

later. In exceptional circumstances permission may be

granted for transfer prior to expiry of this period, for

reasons to be recorded in writing.

(b) In the event of the allottee company being merged with

another company or in the event of a split of the

allottee company or the setting up of a subsidiary by

the allottee company, in accordance with statutory

provisions and with the permission of the concerned

regulatory authorities, the consequent substitution of

name of the allottee may be allowed prior to the expiry

of the period mentioned in sub-Para (a) above, for the

reasons to be recorded in writing.

(c) In all cases of transfer or substitution the transferee, the

new entity must satisfy in every respect of the

conditions of eligibility for allotment of the site in

question on the date of the application for transfer or

substitution.

(d) Permission for transfer shall be subject to payment of

transfer charges as determined from time to time.”

9.The appellant has relied upon the statement made in affidavit dated

2.7.2008 filed by Mr. Vikas Goel in the High Court of Singapore thus :

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“16. As mentioned earlier, Esys Singapore’s bankers and

creditors withdrew their credit lines and demanded

payment within days of the SEC Announcement.

While Esys Singapore was negotiating with its bankers

and suppliers, Esys Singapore was at the same time

considering the various means by which it could raise

funds to pay its creditors. One option it considered was

through the sale of its assets, including its inventory,

account receivables and subsidiaries. Esys Singapore

approached several parties for this purpose. However,

due to the deep financial crisis which Esys Singapore

was in at the time as a result of the SEC

Announcement, the offers which Esys Singapore

received were based on liquidation value, as far as the

subsidiaries were concerned. Only Esys Global

Holdings Ltd. was prepared to buy certain subsidiaries

including Ascent Capital Limited (which owned Esys

Latin America), Esys India, and Esys Distribution

(Korea) Ltd., based on these subsidiaries’ book

values/fair market value, without any pre-conditions.

17. This offer by Esys Global Holdings Limited represented

the best opportunity for Esys Singapore to maximize

the amount of funds it could raise at that time to pay

its creditors. Esys, Singapore therefore agreed to sell

certain subsidiaries to Esys Global Holdings at book

value/fair market value, without pre-conditions.

Further, at the time, Esys India, Esys Korea and Esys

Latin America also had substantial amounts owing to

their bankers and creditors. The sale of these

subsidiaries to Esys Global Holdings Limited meant

that these liabilities were transferred to the buyer, Esys

Global Holdings Limited. The net liabilities of the

Esys group were substantially reduced upon the sale of

these entities.

x x x x x

26. The Plaintiffs have alleged that I have divested my

shares in Esys Singapore in order to dissipate my

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assets. This is not true. The transfer of my shares in

Esys Singapore to Rainforest was to facilitate the

investment of Teledata in Esys Singapore, in order to

shore up the confidence of Esys Siongapore’s creditors

in the wake of the SEC Announcement. I elaborate

briefly on this below.

27. As a result of the SEC Announcement, Esys

Singapore’s creditors suffered a crisis of confidence in

Esys Singapore’s ability to meet its debts. The

management of Esys Singapore decided that in order

to rebuild the creditors confidence in Esys Singapore,

a new investor would have to be found.

28. After extensive discussions with potential investors,

Esys Singapore decided that Teledata’s offer contained

the best terms which Esys could secure in the

aftermath of the SEC Announcement. To facilitate the

investment of Teledata (which was and is currently

listed on the Mumbai Stock Exchange), in late

December, 2006, I transferred my 19,999,998 shares in

Esys Singapore to Rainforest. In exchange, I received

shares in Rainforest.

29. Teledata subscribed for new shares in Rainforest. In

consideration, Teledata paid for the new shares in

Rainforest and provided guarantees to Esys

Singapore’s creditors. On completion of the

transaction, I owned 58,880,000 shares in Rainforest

(representing 49% of Rainforest) and Teledata

61,120,000 shares in Rainforest (representing 51% of

Rainforest).

30. As can be seen, the transfer of my shares in Esys

Singapore was part of a package to secure a new

investor in Esys Singapore. It was not carried out as a

means to dissipate my assets. I will need additional

time to elaborate on this in a substantive affidavit.”

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10.With respect to transaction with Teledata, following facts have also been

mentioned in the affidavit dated 2.7.2008 of Mr. Vikas Goel :

“35. The Plaintiffs have sought to rely on the sale of Esys’s

assets, and on the transfer of my shares in Esys

Singapore to show that Esys Singapore and I

dissipated and will continue to dissipate our assets in

the future. This is not true. Now that Esys Singapore is

a subsidiary of Teledata, Esys Singapore has access to

the resources of the Teledata group of companies.

Given this, there is no need for Esys, or myself, to

dissipate any of our assets. Indeed, Teledata has

furnished numerous guarantees to Esys’ suppliers.

Copies of some of these guarantees are annexed as

VG-20. The guarantees furnished by Teledata have

enabled Esys Singapore to tide over a difficult period

after the Plaintiff’s SEC Announcement, which

prompted a deep financial crisis for Esys Singapore.

36. It will also not be possible for any of Esys Singapore’s

assets to be dissipated as Teledata holds a charge over

these assets. Teledata, being a public listed company,

is accountable to its shareholders for any disposal of

the assets of its subsidiary, Esys Singapore. Copies of

the charges in favour of Teledata are collectively

annexed as VG-21. As this is publicly available

information, it is surprising the Plaintiffs have chosen

not to inform this Honourable Court of the existence of

the charge created in favour of Teledata.”

11.In the affidavit dated 24.7.2008 filed in the High Court of Republic of

Singapore in the same suit with respect to charge by Teledata Informatics Ltd.,

over the assets of M/s. Esys Singapore, it has been mentioned that general

charge of Teledata remains. Following facts have been mentioned :

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“10. I have at paragraphs 16-17 of my 2

nd

Affidavit referred

to Esys Global Holdings Ptd (“Esys Dubai”) being

prepared to buy certain of Esys Singapore’s

subsidiaries at those subsidiaries’s book values/fair

market value, without any pre-conditions. I expand on

the circumstances of this offer below.

11. Esys Dubai was prepared to buy over Esys Singapore

shares in its subsidiaries, and make a loan to Esys

Singapore up to the total value of about USD48m.

However, Esys Dubai could only buy the subsidiaries

once those subsidiaries had been properly valued, and

any regulatory approvals required for the transfer of

those shares had been obtained.

x x x x x

19.Teledata essentially recommended the same kind of

restructuring for Esys Singapore to deal with its

financial situation, in that it recommended a holding

company to hold 100% of the shareholding in Esys

Singapore. However, instead of proposing the issue of

convertible bonds from the holding company like

Credit Suisse, Teledata was prepared to invest directly

in the holding company. Furthermore, Teledata was

prepared to give Corporate Guarantees to Esys

Singapore’s Suppliers and bankers, in return for a

charge over Esys Singapore’s assets in order to keep

Esys Singapore operating.

x x x x x

21.As part of the Teledata deal, and as previously set out

in my 2

nd

Affidavit, I transferred all my shares in Esys

Singapore and in Esys Holdings Pte Ltd (collectively

referred to herein as “Consideration Shares”) to

Rainforest, and received Rainforest shares in return.

On completion of the transaction, as set out in

paragraph 29 of my 2

nd

Affidavit, I owned 58,888,000

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shares in Rainforest (representing 49% of Rainforest)

and Teledata owned 61,120,000 shares in Rainforest

(representing 51% of Rainforest).

22.Teledata paid valuable consideration to Rainforest to

subscribe for its shares in Rainforest. All of

Rainforest’s assets, including the subscription monies

received from Teledata, and the Consideration Shares,

are subject to the control of the Board of Rainforest,

which is controlled by Teledata as the majority

shareholder. As minority shareholder of Rainforest, I

am certainly in no position to dissipate its assets.”

12.A copy of Enterprise IT, 2008 has also been filed with rejoinder in which

it has been reported that Teledata has acquired Esys.

13.In view of the aforesaid statement made in the affidavit of Mr. Vikas Goel,

it is apparent that in spite of the clear direction made by this Court, the

respondent has suppressed the facts with respect to its deal with M/s. Teledata

Ltd. There is concealment of material facts by the respondent in spite of having

been directed to disclose the full facts in the counter affidavit by specific order

passed on 16.7.2015. It is apparent from the affidavit dated 2.7.2008 of Mr.

Vikas Goel extracted above that in order to raise the fund to pay to its creditors,

M/s. Esys Singapore considered its option to raise it through the sale of its assets

and subsidiaries and M/s. Esys Global Holding Ltd. was prepared to buy

subsidiaries including M/s. Esys India based on book value. It has been

mentioned in para 17 that sale of its subsidiaries to M/s. Esys Global Holding

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meant that these liabilities were transferred to the buyer. Thus there is sale of

assets and subsidiaries and the denial that there is no sale is incorrect statement.

In the affidavit dated 24.7.2008 in paras 10 and 11, it is apparent that purchase

by M/s. Esys Dubai of the assets of M/s. Esys Singapore and its subsidiaries

after taking regulatory approvals which were required for transfer of shares.

Thus, under the garb of transfer of shares, the respondents have completed the

sale and is creating a screen to conceal this aspect. Deal with Teledata is also

apparent from the aforesaid paras 19 to 21 of the affidavit of Mr. Vikas Goel.

Unfortunately, the respondent has concealed the facts with respect to Teledata

and has not come out with clean hands. It is also apparent that Teledata in its

unaudited results has published that Teledata along with its subsidiary M/s. Esys

Technologies is setting up a six acre TBO facility in Rajeev Gandhi Information

Technology Park in Chandigarh.

14.In Juggilal Kamlapat v. Commissioner of Income-tax, U.P. AIR 1969 SC

932, it has been laid down that the doctrine of lifting of corporate veil can be

applied by court and it is entitled to lift the mask of corporate veil when it is

used for perpetrating fraud or for evasion of tax. Corporate veil can also be lifted

where promoters act in furtherance of their dishonest and fraudulent design as

laid down in Jai Narain Parasrampuria (Dead) & Ors. v. Pushpa Devi Saraf &

Ors. 2006 (7) SCC 756, State of U.P. & Ors. v. Renusagar Power Co. & Ors.

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AIR 1988 SC 1737. Lifting of the veil has been held to be permissible in Life

Insurance Corporation of India v. Escorts Ltd. & Ors. AIR 1986 SC 1370. In the

instant case task is made easy as such facts on lifting veil are writ large from

affidavits of respondent filed in Singapore High Court.

15.It is apparent that M/s. Esys Singapore has entered in such transactions

with Dubai company and it appears prima facie from the affidavit of Mr. Vikas

Goel and there was a further right created in favour of Teledata though dispute

with Teledata has to be decided in pending cases. The provisions of Rule 9 of

the Rules and Clause 15 of the allotment letter have been clearly violated. Thus,

we are of the considered opinion that the order passed by the High Court is not

sustainable and resumption of the allotted land by the appellant was legal and

proper. The respondent is guilty of suppressio veri and suggestio falsi and has

violated order dated 16.7.2015 passed by this Court as to disclosure.

16.Resultantly, we have no hesitation in setting aside the order passed by the

High Court. The appeal is allowed. Parties to bear their own costs.

…………………………J.

(V. Gopala Gowda)

New Delhi; ………………………..J.

May 11, 2016. (Arun Mishra)

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ITEM NO.1A-For Judgment COURT NO.9 SECTION IV

S U P R E M E C O U R T O F I N D I A

RECORD OF PROCEEDINGS

Civil Appeal No(s). 3765/2016

ESTATE OFFICER UT CHANDIGARH & ORS. Appellant(s)

VERSUS

M/S. ESYS INFORMATION TECHNOLOGIES PVT. LTD. Respondent(s)

Date : 11/05/2016 This appeal was called on for pronouncement

of JUDGMENT today.

For Appellant(s)

Mr. Chandra Prakash,Adv.

For Respondent(s)

Mr. Tarun Gupta,Adv.

Hon'ble Mr. Justice Arun Mishra pronounced

the judgment of the Bench comprising Hon'ble Mr.

Justice V. Gopala Gowda and His Lordship

The appeal is allowed in terms of the

signed Reportable Judgment.

Pending application(s), if any, stand(s)

disposed of.

(VINOD KR.JHA) (MALA KUMARI SHARMA)

COURT MASTER COURT MASTER

(Signed Reportable judgment is placed on the file)