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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 2nd 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 2nd 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 2nd 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)